A Look at the Changes to New York City’s Commercial Business
State and local lockdowns have impacted businesses across the world due to COVID-19. With the retail and restaurant industry being one of the hardest hit, we decided to take a look and see what these changes have done to the New York commercial real estate market, specifically in these sectors.
First, a Look at Retail
According to the reports by Cushman & Wakefield, the vacancy rate for retail shopping centers rose from 6.4% in the 4th quarter of 2019, to 7.1%in the third quarter of 2020 nationwide. In New York City specifically, vacancy rates have not shifted largely moving from 6.6% to 6.9% from fourth quarter to third. Despite the available retail property for lease, the prices have not moved significantly, with asking rents only dropping about 12% compared to the same time last year. To no one’s surprise, the hardest-hit industries in the retail sector are those considered non-essential businesses such as clothing stores and other lifestyle groups.
Consumer spending has dropped -7.6%, with more people shopping online due to the pandemic and others saving their money because of the financial climate. When economies are faced with recessions and high unemployment rates, these sectors of the economy are often the businesses that suffer. In Manhattan, some of the clothing and shoe stores that will be closing their doors for good are: The Frye Company, Jeffrey, and Neiman Marcus’ Hudson location. These stores are not the only ones who closed down their brick-and-mortar stores in 2020, however, these closures specifically are largely to blame on COVID-19. Many companies such as JCPenney, Kmart, and New York City’s iconic Barneys, either filed for bankruptcy in 2019/2020 or already made plans to close their stores before the pandemic began.
Out of all the retail categories, convenience stores, drug/grocery stores, hardware/home improvement, have all found continued success at this time. These businesses have all been deemed essential by local and state governments.
For the retail industry, brick-and-mortar stores were already aggressively impacted with the rise of online shopping, fast or free shipping, and e-commerce as a whole. COVID-19 certainly did not help their financial situation, with many businesses choosing to move online or close certain branches. That being said, there is always a demand and consumer spending continuously fluctuates as people’s personal financial situations change. Whether that is in person or online, shopping will certainly adapt due to the changes at present. The retail stores that remain may choose to focus on customer experience, instead of direct in-person sales as a means to stay relevant.
Now Onto Our Beloved Restaurants
A report by the Office of the New York State Comptroller, notes that prior to the pandemic in February 2020, roughly 315,000 people worked in the restaurant industry, dropping to 91,000 jobs during the lockdown, and then back up to 174,000 jobs by the end of August. Through the state and local mandates, restaurants have yo-yo’d from closed, to limited capacity, outdoor dining extensions, to take-out only, with few businesses able to employ their regular amount of staff from pre-pandemic times. About 1,000 of the 23,000 restaurants and dining establishments have now been forced to close permanently since March 2020.
With the changing curfews, restrictions, and infection rates, it is difficult to predict exactly how many restaurants will end up closing their doors for good. According to a survey by the New York City Hospitality Alliance, out of the 400 restaurants and bars surveyed, 30% did not pay their October rent and 88% could only pay a portion of the rent that month. The City is at odds with the Fire Department and current regulations restricting the use of outdoor and space heaters for those restaurants who have broadened their space by using a portion of the sidewalk and street. While the government and the Fire Department try and work with the restaurants, it has been an extremely difficult year for the industry as a whole, limiting capacity to 25% and working with much smaller spaces than the rest of the country.
The commercial retail and restaurant industry has undoubtedly been affected by the pandemic. The suspected silver lining lies in the belief that people will make an active effort to dine out, shop in person, and seek social stimulants after the almost year-long lockdowns and restrictions. We are social beings who thrive on interaction and love these sectors of the economy. As the vaccine becomes available and normalcy resumes, the clock will turn back and we will continue to indulge in the activities we love.
Want to learn more about the effects of Covid 19′ on New York City?, please click here to go to our article about COVID-19’S Impact On The Residential Market In New York City