Amid Rising Storefront Rents, NYC Proposes Commercial Regulation
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
This article was updated on 10/19/23.
While there isn't really an award for an area hardest hit by the COVID-19 pandemic, few would argue against naming New York City. Given the population density of the area, it's no surprise that the global pandemic hit the city hard and caused numerous businesses to shut down. While the city's business community is slowly making a comeback, the truth is that a storefront for rent in NYC is becoming a more expensive asset.
Multiple factors come into play with the rising cost of running a store in New York City, including higher demand from business owners in industries more pandemic-proof, such as drug stores and payday loan centers. Other issues are landlords trying to recover lost payments from business owners who either passed away or left the business community entirely due to costs.
New York's City Council is sympathetic to the business community. However, they are still proposing a very bold set of regulations that would change business in New York overnight: commercial rent control, highlighting exactly how high storefront rents can go for establishments of 10,000 square feet or less.
Many in NYC's CRE Industry are Pushing Back
Naturally, the commercial real estate industry isn't just taking the news and going on with their days. Many in the industry are horrified at the thought of anything resembling commercial rent control. Although some see it as a temporary measure, others feel that it will become a permanent part of New York City's commercial real estate industry.
Some are even taking their feelings to the next level, indicating that commercial real estate rent control is even against the State Constitution. Since the regulations aren't in place yet, it isn't something that can be challenged at the highest levels. Yet, with more people concerned about their legal rights, it seems that it will only be a matter of time before a formal challenge takes place.
How COVID-19 Clobbered NYC Storefronts
COVID-19 was far from kind to NYC storefronts. When everyone was required to stay home, it meant that they weren't going to their usual stores for shopping. Amazon won the pandemic shopping wars, but your local NYC storefront for rent wasn't so fortunate.
As more stores went out of business, vacancies shot up, but rents plummeted. This meant that landlords had to take what they could get in terms of rent, whether or not that allowed them to cover all of their own costs.
That was 2020 in a nutshell, but 2021 was only marginally better. In fact, the Office of the New York State Comptroller released a statement on October 7th indicating that NYC lost over 850 million in property taxes due to the pandemic. State Comptroller DiNapoli indicated that it will take NYC many years to recover from pandemic-time losses.
Now, Most NYC Workers Are Returning to the Office
The reality is simple: storefronts rely on food traffic, especially local restaurants. So the news of NYC workers returning to the office is light at the end of the tunnel. Reduced foot traffic leads to reduced revenues, which is exactly what put pressure on so many storefront owners in the first place.
With workers returning to the office, local stores can look forward to folks browsing the shelves at lunchtime, running errands, or just grabbing a bite to eat. The culture of NYC also helps, as people are ready to go back to eating out, getting away from their desks, and getting time to socialize.
Workers' unions are concerned about their privacy rights and the rush to go back to the office when the COVID-19 pandemic is not only still here, but seeing multiple variants. The Delta variant is the most contagious, but other variants still give experts pause.
And NYC Is Enforcing Its Vaccine Requirements
It isn't all doom and gloom, thankfully. Indeed, NYC is enforcing strong vaccine requirements, including firing municipal workers that refuse to get the vaccine. The Key to NYC program is already underway, and workers were required to report back to work as of October 12th.
By enforcing the vaccine requirements, NYC is trying to not only stop the spread of COVID-19 but increase traffic to local businesses as well. Business owners have mixed feelings on the presence of a vaccine mandate, but it is too early to tell if the move from Mayor De Blasio will trigger the desired increase to the local economy.
The Mayor made it clear that small businesses are expected to comply with the mandate requirements also, checking for proof of vaccination for anyone over the age of 12. At this time, emergency use authorization for vaccination of minors under 12is still pending.
Stiff penalties are in place for small businesses that refuse to comply with the vaccination mandate, but many in the community feel that demanding compliance from their customers will mean even less traffic. In a time where revenues need to be higher to recoup losses, many business owners are worried about alienating their customers and losing precious opportunities for revenue and ongoing loyalty.
Why It Matters
NYC still has a long way to go in terms of recovery. Landlords concerned about rents are looking at their own cash flow obligations, including paying down mortgages on storefronts and other commercial properties. At this time, there aren't any relief programs in place for landlords hit hard by the pandemic, a growing point of contention for many in the commercial real estate industry.
Business owners looking for a storefront for rent are having to be additionally cautious; high rents are just one of the many expenses they must budget for every month. With reduced foot traffic in an area hard-hit by the pandemic, it makes sense that there is a heavy dose of caution on all sides.
The City Council is also concerned given that each of the storefronts generates property taxes for the city, but taxes usually do not get paid on time without solid cash flow from business income. It is a delicate combination of circumstances, but time will tell how the businesses of New York City recover from the pandemic.
Browse & List Storefronts for Rent for Free on MyEListing.com!
You can list and browse storefronts for rent for free right here on MyEListing.com. Sign up for an account and receive customized email alerts and access to accurate market intelligence.
Other recent articles
Article Search
Share
All Article Categories
