Our Community Cannot Afford the Cost of ‘High-Rent Blight’

Chelsea Now

BY STATE SENATOR BRAD HOYLMAN | The market has no morals. A better example of this maxim couldn’t be found than on our local avenues and side streets, where independent businesses are falling like dominoes, forced out because of rising rents.

Once they’re gone, these spaces might be filled by a national chain — maybe a bank or a drugstore — but often they remain vacant, sometimes for years.

I continually hear concerns about this phenomenon, known as “high-rent blight,” from neighbors who are concerned about the availability of local goods and services, and the negative impact empty storefronts have on a neighborhood, not to mention the loss of treasured independent establishments, like bookstores and restaurants.

My new report, “Bleaker on Bleecker: A Snapshot of High-Rent Blight in Greenwich Village and Chelsea,” examines this vexing problem. Using data collected through surveys across major commercial hubs, the report found a storefront vacancy rate as high as 6.52 percent along Eighth Avenue from 15th to 22nd Sts. and an even more alarming 10.87 percent storefront turnover rate over the last 12 months.

The alarming vacancy and turnover rates on Eighth Avenue in Chelsea are apparent to anybody who has walked down the street in recent months. “For Rent” signs hang in windows while chains and pharmacies occupy vast swaths of real estate once home to legacy businesses. In fact, between 2010 and 2013 alone, nine small businesses vanished from Chelsea.

A trend has emerged: landlords, in the pursuit of higher and more reliable rents, don’t renew the lease of longtime businesses. They then keep the space vacant, holding out for the payout of a long-term lease from luxury retail or corporate chain, which can take months, or even years. The result is a glut of empty storefronts or chain stores and high-end national retailers, to the detriment of local small businesses.

For years, the blog “Jeremiah’s Vanishing New York” has chronicled these changes across New York, taking stock of the disappearance of longtime businesses like Florent (24 years in operation), Skyline Books (20 years in operation) and Rawhide (34 years in operation). Similarly, The New York Times has continually reported on the plight of Chelsea’s small business community as they grapple with exploding rents and yawning inequality.

Some real estate analysts insist that higher rents are simply the natural outgrowth of a strong retail market or that the recent spate of closings along Eighth Avenue and elsewhere is due to new pressures from Amazon and other online retailers. Both could be true. That doesn’t mean a community shouldn’t try to do something to save the “mom-and-pops.” Self-concern should be a motivating factor. Studies show chain stores are far less likely than their local counterparts to keep profits in the community. One study found that only about 13.6 percent of revenue from national chains is reinvested back into the local economy, compared to 47.7 percent from locally owned businesses.

I’ve suggested a number of strategies to address high-rent blight and preserve our independent businesses. The major ones include:

  • Creating a Legacy Business Registry that would track and maintain a list of small businesses that have been in operation for at least 30 years. This would enable the State to recognize important businesses and possibly provide them and their landlords with historic preservation tax credits and other incentives.
  • Passing legislation that would allow the city to implement formula retail zoning restrictions. Under such a plan, local communities would get a say on the number of formula retail stores opening in their neighborhood.
  • Phasing out deductions for depreciation of property and operating expenses for building owners who leave retail spaces vacant over a year.
  • Eliminating the Commercial Rent Tax (CRT) for small businesses. The CRT is an onerous and outdated burden on commercial tenants below 96th St. in Manhattan. The City Council is poised to act on reducing this tax under the leadership of Councilmember Dan Garodnick, but the State should act, as well.
  • Requiring the city to collect and publish data on commercial vacancy rates. Currently, this information is not available to the public. We need to get a handle on the extent of this problem citywide. As the expression goes, you can’t manage what you don’t measure.

Short of commercial rent control, which faces steep hurdles in both Albany and the city, we can take steps to reign in the rapacious market forces in our local real estate market to protect small businesses and defend the character of our neighborhoods. I’ll soon be introducing legislation based on the ideas in this report. In the meantime, I’d be interested to hear your views on this important issue at hoylman@nysenate.gov.