Empty Storefronts hit the Upper East Side
Retail in the Upper East Side was already struggling before COVID, the pandemic just worsened the problem
When it comes to real estate, it’s all about location, location, location. One of the most expensive neighborhoods in Manhattan, the Upper East Side was once a retailer’s dream, composed of established, wealthy residents, and not long ago filled with small boutiques that met niche needs. It was a place where people valued their shopping experience as much as the goods they were after. But a downturn quickly exacerbated by the pandemic made this shopper’s paradise a stretch of empty storefront.
Walk down the major avenues, and cross east from Madison to Lexington, and “space for rent” signs posted in empty storefronts begin to outnumber those that are open. Though tempting to attribute these vacancies to the city’s staggering pandemic response, the reason for them is more complicated.
“Landlords are easy to make the bad guy,” said Nicholas Dullea, the managing principal of the real estate firm Corbett & Dullea, “but COVID was a bad situation for everyone.” Dullea claims that retail was struggling even before COVID-19, citing market disruptors, such as Amazon, that are making retail stores less appealing than they once were.
In the Upper East Side, small boutiques that relied on people coming into shop struggled to remain open during the pandemic. On March 22 of 2020, the stay-at-home order was instituted by former Governor Andrew Cuomo, which halted the flow of customers overnight, leaving store owners scrambling to make ends meet.
The NYC Department of Finance reports over 400 vacant storefronts as of June 2020, which is a 20 percent increase from December of 2019.
Sigmund Shipp, an associate professor of urban planning and policy at Hunter College, said the reason behind the vacancies is landlords’ rigid deal-making, which is something that is handled by real estate agents like Dullea.
“My hypothesis is the rents are very exorbitant,” Shipp said. “From what I’ve read, landlords are pretty inflexible. I feel landlords don’t give as much as they could.”
Residential rents dropped in the Upper East Side over the past two years. In 2021, the median rent was $2,450, while in 2019 the median rent in the neighborhood was $2,900, according to Streeteasy. And, according to MarketWatch, the average retail asking rent dropped 10.7 percent in 2021.
Throughout the pandemic, businesses were provided unprecedented government loans in order to make up for the loss in customers. In 2020, New York started the Pandemic Small Business Recovery Grant Program, which allocated $800 million in loans for small businesses impacted by the pandemic.
Even though commercial rent asking prices dropped from previous rates, according to the Real Estate Board of New York (REBNY) Spring 2021 Market Report, the average asking rent for retail spaces in the Upper East Side dropped by less than 15 percent. Shipp said this did not provide enough incentive for new businesses to open or to sustain the businesses that were already running.
“It wasn’t a bargain basement sale,” Shipp said. Stores in the Upper East Side struggled to retain the same amount of business as before, being composed of small, highly specialized stores made the area more vulnerable than other areas. The stores hit hardest by the COVID pandemic are small boutique stores that cater to a specific clientele — the same types of stores that used to proliferate along the avenues of the Upper East Side. They were the ones exposed most to the problems created by the pandemic, Shipp said.
Aaron Harding, a former business owner, took to street vending in the Upper East side after closing his men’s clothing store, Family Affair, due to the pandemic.
“I can’t save a store that’s dying due to COVID,” Harding said.
After eight months of $3,500 rent and utilities, it became too much of a burden, but Harding saw a way to help the community by selling masks and other PPE on 86th street.
“People were really receptive to what I was doing, [they] were more coming together than being snobby,” Harding said.
The repetition of goods and services were another contributing factor of the vacancies, according to Shipp, making it “hard for businesses to survive.” Before the pandemic, multiple fashion stores were able to be sustainable, but that is no longer a viable option.
The pandemic didn’t just affect small businesses, though they may’ve been hit hardest. Many big brand stores closed, even with established reputations. Jo Malone, for example, a high-end fashion store that opened in the Upper East Side in 2019, closed within two years. Other big brand stores, like Fairway Market, have also closed within the last few years.
The problem of commercial rent is not new. In fact, there have been years of proposed legislation to help tenants with rising rents. In 2019, City Councilman Stephen Levin introduced a bill focused on regulating commercial rent.
The proposed bill would create a system to stabilize rent for certain retail spaces. It would also create a committee made up of financial experts appointed by the mayor, who would then be in charge of deciding the adjustments in rent every year.
“There needs to be more equitable representation,” Shipp said. Decision makers need to represent the people who would receive rent stabilization. In order to do this, he says, policymakers should actually rely on small business owners who are experiencing the problems to help create the solutions.
REBNY strongly opposes the implementation of rent stabilization, from their testimony at a Committee on Small Business meeting in September. “Commercial rent control,” it read, “is a flawed concept that fundamentally fails to address the root causes of the greatest challenges facing small businesses in New York City.”
Instead, REBNY wants the city to look at other ways to help promote small businesses, such as by eliminating the commercial rent tax. The commercial rent tax is an effective 3.9% tax based on the amount of rent tenants pay. The tax applies to businesses that pay over $250,000 in gross rent, according to the city government’s website, and are located south of 96th St., the start of the Upper East Side.
Taken together, there is every indication that the Upper East Side is going to struggle to return to its former retail paradise, as the pandemic still goes on.
“Those storefronts are going to remain vacant,” Shipp said. “Or it's come in today and leave tomorrow.”