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There are at least three interlinked causes. First, the rent, as you may have heard, is too damn high. It’s no coincidence that retail vacancies are highest in some of the most expensive parts of the city, like the West Village and near Times Square. From 2010 to 2014, commercial rents in the most-trafficked Manhattan shopping corridors soared by 89 percent, according to CBRE Group, a large real-estate and investment firm. But retail sales rose by just 32 percent. In other words, commercial rents have ascended to an altitude where small businesses cannot breathe. Some of the city’s richest zip codes have become victims of their own affluence.
Second, the pain of soaring rents is exacerbated by the growth of online shopping. It’s typically simplistic to point at a problem in the U.S. and say, “Well, because Amazon.” But it is no coincidence that New York storefront vacancy is climbing just as warehousing vacancy in the U.S. has officially reached an all-century low: A lot of goods are moving from storefronts to warehouses, where they are placed in little brown boxes rather than big brown bags.
Walking around the Upper East Side, where I live, I find it striking how many of the establishments still standing among the many darkened windows are hair salons, nail salons, facial salons, eyebrow places, and restaurants. What’s the one thing they have in common? You won’t find their services on Amazon. The internet won’t cut my hair, and not even the most homesick midwesterner goes online to order a deep dish to be delivered from Chicago to New York. Online shopping has digitized a particular kind of business—mostly durable, nonperishable, and tradable goods—that one used to seek out in department stores or similar establishments. Their disappearance has opened up huge swaths of real estate.
One might expect that new companies would fill the vacuum, particularly given the evidence that e-commerce companies can boost online sales by opening physical locations. But that brings us to the third problem: Many landlords don’t want to offer short-term leases to pop-up stores if they think a richer, longer-term deal is forthcoming from a national brand with money to burn, like a bank branch or retail chain. The upshot is a stubborn market imbalance: The fastest-growing online retailers are looking to experiment with short-term leases, but the landlords are holding out for long-term tenants.
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New York’s problems today are an omen for the future of cities. Most people don’t live downtown because they love drifting off to the endearing sounds of honking cars and hollering investment bankers. Rather, they want access to urban activity, diversity, and charm—the quirky bars, the curious antique shops, the family restaurant that’s been there for generations—and the best way to buy that access is to own a bedroom in the heart of the city.