The Bottom LineThe Bottom Line

Can NYC’s Storefront Registry Help Level the Playing Field for Embattled Commercial Tenants?

After the pandemic, you’d think commercial landlords would be desperate to lease out storefronts for whatever price they can get. But in NYC that is not quite the case.

NYC streetfront

(Photo by: Oscar Perry Abello) 

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Born and raised on Manhattan’s Lower East Side, Francisco Gonzalez knows New York City’s storefronts are sacred — bodegas, barbershops, beauty salons, 24-hour laundromats, legendary holes in the wall and proverbial eyes on the street. But he also knows that New York City’s storefronts are under threat of losing the deep community ties that are a large part of what makes them so sacred.

Since 2001, Gonzalez has worked as a real estate broker for commercial spaces as well as residential in his neighborhood, also known as Alphabet City, the East Village, or as he knows it best, Loisaida — the name bestowed upon it by Puerto Rican poets and activists in the 1970s.

“Casa Adela has been here since the 1970s,” Gonzalez says. “Adela was a close friend of mine. We still have some places like that. El Rinconcito, on 10th Street. They’re under contract [to rent their space] for so many years but once that contract expires, the rents go up and the business closes. That’s the real deal when it comes to that.”

Even the pandemic hasn’t seemed to re-adjust property owners’ long-term expectations. Gonzalez says during the pandemic he saw some vacant commercial spaces being offered at prices he hadn’t seen since the 1990s. But they were only offering leases at those prices for one or two years at most, anticipating they could re-raise rents to whatever they want once the pandemic is completely over. And now, even after some commercial tenants completely folded during the pandemic, Gonzalez says commercial landlords are already back to asking for prices that are close to pre-pandemic levels.

And yet, “there are still a lot more vacancies and commercial spaces right now in my area,” Gonzalez says.

Maybe some unprecedented new data can help. For the first time, there’s an official count of 70,202 storefronts in New York. The figure comes from the city’s Department of Finance, which earlier this year released the first edition of the city’s storefront registry.

The NYC Storefront Registry contains data on every storefront in the city, including lease terms (such as rent, least start and lease end dates), square footage of each premises, permitted business type, and whether the storefront is leased, occupied by the building owner, under construction, or vacant. The Department of Finance is supposed to update the registry every quarter. The most recent figures available are from December 2019.

It’s music to Gonzalez’ ears. Information is power, and his eyes light up just thinking about how it can help him negotiate on behalf of his small business clients.

“I didn’t even think a thing like that exists,” Gonzalez says. “This information is key to my commercial clients. I can show them what the market is like, I can show them comparables. It’s all useful. It’s saving me a lot of work.”

The registry exists thanks to United for Small Business NYC, a citywide coalition of small business groups, community development groups and legal aid groups serving small businesses. In 2019, the coalition pushed for the passage of Intro 1472, mandating the city’s Department of Finance to collect the data, make it available to the public, and update it every quarter. Owners of a ground floor or second floor commercial premises are required to submit the information as part of their annual income and expense statements, and face fines of up to $500 for failing to do so.

The City of San Francisco passed a law seven years ago to create a registry of vacant storefronts, but until 2019 landlords faced no penalty for failing to report vacancies.

“This is the type of data that housing organizers throughout New York have for the housing market, and they really use this kind of data to create strong organizing campaigns, and that’s why we were so involved in pushing for the law,” says Karen Narefsky, senior organizer for equitable economic development at the Association for Neighborhood & Housing Development, one of the coalition member organizations.

The registry includes all “ground-floor or second-floor commercial premises that are visible from the street and accessible to the public directly from the street or from the interior of a building.” It’s no surprise Manhattan leads the way with 25,304 storefronts, followed by Brooklyn with 16,671, Queens with 15,230, the Bronx with 9,970, and Staten Island with 3,027.

Citywide, 5,831 storefronts were reported vacant — a storefront vacancy rate of 8.3%. By borough, Brooklyn and Manhattan were nearly tied with 9.2% and 9.1% storefront vacancy rates, respectively, followed by Staten Island at 8.5%, Queens at 7% and the Bronx at 6.8%.

Map created by Oscar Perry Abello using NYC Dept of Finance data

The data can also be analyzed by council district as well as census tract. Districts further out in the boroughs beyond Manhattan tend to have lower vacancy rates than closer into the core of the city. That may be an indication of less turnover, but it’s also an indication that retail storefronts are strong throughout the city.

Neighboring council districts 35 and 36 topped the rankings with 16 and 14 percent storefront vacancy, according to a Next City analysis. The districts cover Bed-Stuy, Crown Heights, Prospect Heights, Clinton Hill and Fort Greene — all predominantly Black but gentrifying neighborhoods in Brooklyn. Both districts are also among the 30-plus that will have a new council member coming into office later this year after this local election cycle.

“That’s one thing we’ll want to look at more closely and see why is that happening, why is there high vacancy in Crown Heights and Bed-Stuy,” says Narefsky. “One thing we are hoping with the changeover in the administration and the city council is that folks coming in are going to be really energized to address what’s happening along commercial corridors. It was a talking point in a lot of the campaigns.”

The registry was supposed to be available by last July, but the pandemic and some legal questions around how much of the data collected could really be made public without violating privacy.

“It’s good to have pre-pandemic benchmarks and as we move forward we’ll also be excited to start getting post-pandemic data,” Narefsky says.

There are actually two sets of data — one set dated to May 2021 featuring data aggregated by borough, council district and census tract, and a second dataset released at the end of June containing the actual data on leasing status and business type for every single storefront in the city listed by address.

As of this writing, the second dataset, the one with every storefront in the city, does not include some crucial data. Specifically, it lumps all storefronts that are not leased out into one category, although un-leased storefronts could be occupied by the owner, under construction, or vacant. Around 10,000 storefronts in the city are not leased out, but nearly half of those were reported occupied by owner, according to the aggregate data set.

There are also some other discrepancies and data issues — for instance, “barber,” “barber shop” and “barbershop” are listed as three different storefront business types.

Coalition members believed that the storefront registry would be an important first step toward leveling the playing field for commercial leasing, which they viewed as heavily tilted in favor of landlords.

“Landlords just have a lot more structural power [since]they have the location[s], and we’ve seen for years — and this is something the registry addresses as well — some landlords have felt like they can just sit on commercial properties and wait for the highest paying tenant,” says Narefsky.

A business owner may be desperate to find or keep a specific location where they already know their customers can find them. They may have already been in that location for decades. The business owner might have invested heavily in the buildout of that space specifically for their business. Or that particular space is the only one in the vicinity that may be the right size, have the right utility hook ups, or have the right certificate of occupancy for their kind of business.

Those are just some of the factors that limit a retail business owner’s viable storefront options, and landlords know that, giving them a leg up on negotiations before they even begin.

On top of that, layer in the decades-long trend in property ownership away from small property owners and toward larger property owners, who often have deep cash reserves and a belief, rational or not, that they can hold off for months or even years for higher-paying tenants.

“You got these big owners, they know how to maneuver and work through a pandemic or a Hurricane Sandy or a 2008 crash,” says Gonzalez. “These guys are no good. Owning 300 buildings or so, all in the neighborhood and all the same, nicely polished but illegally taking a studio apartment and converting it into a three-bedroom, catering to students. Then jacking up the commercial rents. I don’t know what type of business can generate $10,000 a month for a 500 square foot space.”

And that’s not all. In a city like New York, immigrants own almost half of all small businesses, so there may be immigration challenges, not to mention language challenges that further boost a landlord’s perceived power over commercial tenants. The actual landlord may not even be part of the negotiations at all — which can be even more intimidating.

“I have a masters degree, I’m fluent in English, but it was tough [to negotiate with a landlord’s lawyer] even with all that,” says Sarina Prabasi, a Nepali immigrant who along with her Ethiopian immigrant husband founded Buunni Coffee.

Buunni Coffee lost one of its four locations since the pandemic began — a location the business had invested heavily into building out — after negotiations fell out with the landlord’s lawyer.

“There was this the hope that the pandemic might mean New York was going to reverse-gentrify and rents were going to go down, but what we’re afraid of is the opposite, that actually the pandemic was a great opportunity for speculators with a lot of cash to just scoop up properties,” says Narefsky. “So that’s something organizers are looking out for, as in what are the speculation games being played and how does that impact the recovery if ownership has really consolidated in fewer and wealthier hands.”

Narefsky says her organization wants to use the new storefront registry data to start digging into how different types of owners may display different behaviors when it comes to storefront leasing — behaviors like keeping spaces vacant while waiting for higher paying tenants to come along, which community groups call warehousing.

“We do see a lot more warehousing and these types of behaviors from larger landlords because they have more flexibility in their portfolio,” Narefsky says. “Not to say small landlords never behave badly, but it’s more likely that a small landlord is someone who knows the neighborhood, who might have a relationship to the tenant and the neighborhood, even if they’re more financially strapped they might be more willing to give a break on rent or they’re more motivated to bring in new tenant if the previous tenant leaves because they don’t want to leave a hole in the corridor.”

One solution proposed is commercial rent stabilization. NYC did have a commercial rent control statute from 1945 to 1963. Various forms of commercial rent stabilization or commercial leasing regulation have come up since then but none have become a reality.

A bill introduced in city council back in 2019 would set up a commercial rent guidelines board, similar to the existing Rent Guidelines Board for rent-stabilized apartments, which would similarly determine annual rates of allowed rental adjustments for commercial tenants. Going beyond just storefronts, under the bill commercial rent stabilization would apply to all retail or office spaces of up to 10,000 square feet and manufacturing establishments up to 25,000 square feet.

“We’ll see how the conversation goes going forward,” says Narefsky. “Our hope is that having this data makes it easier for those who want to address issues around commercial rent and gentrification and displacement to put forward policy solutions that address what’s actually happening on the ground.”

Real estate industry lobbyists oppose the bill.

Small landlords fear commercial rent stabilization would push them out as owners, especially those that have rent-stabilized residential units, because in those cases, they say, commercial rent is the only source of income from their properties that can keep up with annual increases in property taxes and other costs. It is a concern that would need to be worked through and addressed by some other means.

All but two of the co-sponsors for the commercial rent stabilization bill on city council are termed-out and leaving office later this year. But one of the holdovers is Council Member Carlina Rivera, whose district includes the Lower East Side. She is also in the running to become the next city council speaker after the newly elected council takes their seats in the fall.

“I think commercial rent stabilization would be great, it would allow certain businesses in particular small mom and pop shops to stay and not disappear over the years, for them to have some security,” says Gonzalez. “That’s how the culture can survive in the neighborhood.”

This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter.

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Oscar is Next City's senior economic justice correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha and Fast Company.

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Tags: new york citysmall business

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