Like Samuel Beckett’s characters in his play Waiting for Godot, New York City street retail landlords may never encounter their quarry. Beckett’s characters waited for a man called Godot who never came; NYC landlords are holding out for those top-tier rents achievable back in 2016.
What? Isn’t the economy doing great? Surely as well or better than in 2016? Consider the federal tax cuts! But this is a story about a national recovery cycle feeding the big players at the expense of the small.
In late 2018, street retail vacancy in all five NYC boroughs was roughly double that of 2016. More often associated with economic decline, in this case the vacancy increase resulted from the recent and ongoing construction (new availability) of huge projects hoping for huge rents.
The new and newly renovated projects seek to justify their development cost by charging high rents to large national retailers. However, the many neighboring properties (bodegas, shoe repair, local restaurants, mom-n-pop shops, etc.) don’t compete well for either the new urbanite’s dollar or their longtime landlords’ dreams of spiraling market demand.
While perhaps not of the scale found in NYC, as an assessor you may see this trend in your jurisdiction’s gentrification districts.
The upward spiral here is not in rental rates but in vacancy; the small shops are closing.