Retail chains complain business in New York City is 'unsustainable'

Retail chains are trying to stay alive despite the coronavirus and that seems to be working in some parts of the country, but not so much in New York City. Today the NY Times reports that major chains have boarded up, stopped paying their rent and some may not come back. While having an outlet in the city is prestigious from a branding point of view, it’s just not sustainable without the usual crowd of tourists who have mostly abandoned the city.


Michael Weinstein, the chief executive of Ark Restaurants, who owns Bryant Park Grill & Cafe and 19 other restaurants, said he will never open another restaurant in New York…

“There’s no reason to do business in New York,” Mr. Weinstein said. “I can do the same volume in Florida in the same square feet as I would have in New York, with my expenses being much less. The idea was that branding and locations were important, but the expense of being in this city has overtaken the marketing group that says you have to be there.”…

In Manhattan’s major retail corridors, from SoHo to Fifth Avenue to Madison Avenue, once packed sidewalks are now nearly empty. A fraction of the usual army of office workers goes into work every day, and many wealthy residents have left the city for second homes…

“In the prime real estate areas, all the stores rely on having half international tourists and half local tourists or those from the local neighborhoods,” said Thiago Hueb, a founder of a jewelry company who had decided to close his flagship store on Madison Avenue before the pandemic struck because of high rents…

For Veggie Grill, a California-based chain of 35 restaurants, New York is “the most difficult market for us to operate in right now,” said Jay Gentile, the company’s chief operating officer…

“We have two hours at lunch and 2½ hours at dinner to make our money,” he said. “We’re still paying very high rent. It’s unsustainable.”


The tourists won’t come back until big attractions like Broadway reopen, but in the meantime these outlets are stuck paying sky high rents despite having no customers. Some chains like Victoria’s Secret have simply stopped paying their rent while stores are closed and that’s leading to a new wave of lawsuits by property owners.

Another reason stores in New York are doing especially badly: None of them have drive-thrus. In the suburbs, outlets like Shake Shack can serve people in their cars and people seem more comfortable with that. But stores in NYC don’t have drive-thrus so it all comes down to foot traffic and right now there just isn’t much of that happening in the city.

But there is another reason to suspect things won’t return to normal anytime soon. A lot of people have simply left the city. It started as the pandemic was breaking out back in February/March. The result has been visible in the drop in rents in the city for the first time since the recession:

According to StreetEasy, Manhattan posted a 3.1 percent drop in rent as of July, the largest year-over-year drop since the Great Recession, when rent fell almost 10 percent. UrbanDigs, a data analytics provider, showed median rents dropping 6 percent compared to last year. And they don’t think this drop will end anytime soon…

When the pandemic hit in March, parts of Manhattan emptied out as residents left to stay with relatives or moved second homes outside of the city. At the same time, NYC’s unemployment rate spiked to 20.4 percent in June — double the city’s Great-Recession peak in December 2009.

This likely means that many of the people who fled the city won’t be coming back. Some lost their jobs and can’t afford to return; others are now working remotely and have realized that it is easier to work from home in a place where you have more room. There are issues of child care too, as New York struggles with trying to bring its students back to school. Others are afraid to ride the subway and wonder: What’s the point of living in Manhattan without the theater or bar scene? Meanwhile, the annual influx of thousands of college students is on hold.


Simply put, a lot of people have realized the big city is a terrible place to be in a pandemic and many won’t be coming back. This will have a lasting impact on everything from rents and vacancies to foot traffic and retail sales. Until the threat of the virus goes away (because of a vaccine or treatment) NYC is going to have a very tough time luring people back.

I found this video of a radio guy named Joey Contino walking around the city and talking about how empty it is. This was posted on this site a week ago so it’s fairly current. Near the end of this he walks into Times Square around noon and, you guessed it, there’s almost no one there.

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