Commercial landlords are negotiating, and many entrepreneurs see this as the perfect time to expand.
Last spring, when Stacey Fraser was forced to close all four locations of her children’s clothing store Pink Chicken because of the pandemic, the thought of firing her tight-knit group of 14 employees, let alone losing her business, was devastating. She spent much of the shutdown crying, losing sleep and watching Netflix.
But as the months went by and her business stabilized — helped in part by a timely Paycheck Protection Program loan — Ms. Fraser started to see the light at the end of the tunnel. Last fall, she noticed signs of life in Greenwich Village, her home of 20 years: A line snaked outside of Magnolia Bakery once again, and children had returned to the playgrounds.
But while the people were back, they had fewer places to visit; there were vacant restaurants and stores everywhere. On Bleecker Street, a retail corridor known for its ups and downs, she counted nearly two dozen empty storefronts. She started researching whether prices had dropped and deals were to be had.
She was on to something: Suddenly Ms. Fraser was not only reopening her four stores but opening a fifth one on hallowed Bleecker Street, something she had “never entertained as rents were too astronomical” there. A few months later, she signed a lease for a storefront two doors down from Magnolia, at about half of what asking rents were in 2016, when rents were at historical highs, according to Louis Puopolo, co-head of operations at Douglas Elliman Commercial, the firm representing the landlord.
“It was scary negotiating a lease during a pandemic,” Ms. Fraser said. “But I think landlords know that giving tenants a chance is worth it right now because there’s a trickle-down effect of getting the street humming.”
Everyone loves a good bargain, and for the first time in years, ambitious business owners are landing affordable leases with tenant-friendly amendments on Manhattan storefronts.
Although Manhattan’s retail landscape is not exactly close to a full-fledged rebound, there have been some positive developments. The easing of pandemic restrictions, the return of some office workers and an influx of new residents have all contributed to a “spring awakening,” Mr. Puopolo said. New state business applications also soared in late 2020, a year that saw the average retail asking rent in Manhattan’s 16 major retail corridors drop by over 13 percent, according to CBRE, a commercial real estate services company.
This has been good news for entrepreneurs like Ms. Fraser and Jessica Resler, who decided to expand her Brooklyn business into Manhattan this year.
“I feel like I’m in the driver’s seat when negotiating with landlords,” said Ms. Resler, a co-founder of Sharks Pool Club, an online service and app where customers can book private rooms with pool tables. “And how long can a market that favors the tenant last?”
Many successful deals involve smaller storefronts and shorter time frames. Now it is not unusual for leases to offer spaces anywhere from six months to five years, considerably shorter than the 10 or 15 years offered before the pandemic.
In Ms. Resler’s case, some landlords accepted smaller deposits, sums for just one or two months as opposed to the norm of four to six months, while another lease included a “Covid pause” clause, which would not penalize her if she couldn’t pay rent in the case of another surge and shutdown.
Ms. Resler and her partners have been touring up to 15 spaces a week all over Manhattan. Her goal is to open about two or three spaces a month, and possibly to turn some of them into screening or card rooms for New Yorkers who are sick of their small apartments but want to socialize in a group. She is considering only move-in-ready spaces. “If a landlord won’t agree to fix things up before a lease signing, I move on.”
As she said, she’s in the driver’s seat. For now.
So is Chirag Kulkarni, a co-founder and chief marketing officer of the Brooklyn-based Medly Pharmacy, which offers same-day prescription deliveries. He said that securing an affordable space in East Harlem felt like he was getting a “buy one, get one free” deal.
The pandemic almost doubled Medly’s revenue, as people stayed indoors and the need for deliveries soared. Months after Mr. Kulkarni opened his headquarters in Bushwick, Medly’s vice president of retail development found the space in East Harlem, which made expanding into Manhattan and points north a no-brainer, he said.
Larger retail spaces are sitting longer, according to Mr. Puopolo. Some fashion brands saw their ground-floor stores get looted and vandalized last summer and have inquired about second- or third-floor availabilities, Mr. Puopulo continued, surmising that some businesses are trying exclusivity as a new marketing tool.
Commercial opportunities in the city are also luring out-of-towners like Fabio Viviani, a chef and hospitality developer in Chicago. He has opened restaurants all over the country but always felt boxed out of Manhattan because of its “insane” rents. Now, he feels, is his chance. So far, he has negotiated restaurant deals with two Manhattan hotels and plans to open an immersive dinner-theater venture here. “I have mad respect for New York, and I want to be part of it,” Mr. Viviani said.
Mr. Viviano’s partner for the dinner-theater venture, Richie Hosein, the chief executive of Etiquette Management Group, is touring spaces in Chelsea and the Meatpacking District. Mr. Hosein, who is no stranger to running restaurants and clubs in Manhattan, said he was enjoying, for once, a less cutthroat process that seems kinder to lessees. “Now I have a little more time to find the perfect space,” he said.
Indeed, it was a grim year for commercial landlords. Many lost money when they had to get creative with lease agreements during the darkest days of the pandemic, said Jared Epstein, a principal at Aurora Capital Associates. Rents were slashed in half or sometimes thrown out entirely, while landlords made deferrals, abatements and negotiated with tenants to pay a percentage of the rent based on their sales. But since March, Mr. Epstein has received an influx of queries on available spaces in the Meatpacking District. Now he believes the city is on the verge of an explosive recovery.
A shifting market is a good chance for some neighborhoods to change for the better, Mr. Epstein said. With lower barriers to entry, some areas may benefit from the opening of unique dining options and stores that couldn’t afford certain neighborhoods prepandemic.
“This revamp is a time for landlords to act more like a concierge, to help curate the look and feel of a street and neighborhood,” he said.
David LaPierre, a vice chairman at CBRE, said the initial retail comeback was based on businesses that cater to residents. The firm has seen many grocery and drugstores, as well as restaurants, sign leases in the past few months. Essential services like these are thriving, he said.
Retail corridors that cater to tourists, like upper Fifth Avenue, will probably take longer to come back to life. “There are still plenty of landlords that are not ready to make long-term deals at cheap rents,” he said.
Mr. Hosein said he was determined to prove that the city is alive and well, especially to those who left. “You need courage and money to open something in Manhattan right now,” he said, “but as a New Yorker, I want to be part of the city making its comeback.”
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