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What’s being done—or not—to save Manhattan’s small businesses from Amazon and big box competition
Broadway, Manhattan’s longest street and a main commercial drag, spans the length of the island from hilly Inwood to Lower Manhattan’s breezy Bowling Green. There are shops from nose to tail, but a recent survey found that Broadway is also home to almost 200 vacant storefronts, dead zones on one of Gotham’s liveliest thoroughfares.
Glaring vacancies aren’t limited to Broadway though. From Madison and Fifth Avenue to Broadway in Soho and Bleeker Street in the West Village, high-end commercial strips in Manhattan are having trouble attracting commercial tenants. A healthy vacancy rate is 5 percent, but some fancy areas are in the midst of high-rent blight, with one in five (20 percent) storefronts vacant.
Further north, in Washington Heights, a whole block of immigrant-owned businesses were essentially evicted after new landlords proposed a 100 percent rent increase and declined to renew their leases.
Why is this happening?
The causes are predictable, but the solutions are not.
High rent, high taxes, regulations that favor owners over tenants, and plain old capitalism—the incentive for owners to seek their property’s maximum value, and the consumer’s desire to acquire goods at the lowest price—all contribute to the twin plagues of vacancy and the mall-ification (national chains displacing small, local businesses) of Manhattan. Stakeholders, though, disagree on what should be done to solve a growing crisis at street level.
This spring, the Manhattan Borough President’s Office (MBPO) recruited volunteers to count all the vacant storefronts along Broadway, citing a dearth of information on how many vacancies exist, and where. The survey follows an effort from two years ago where the office reached out to small businesses and offered potential policy solutions to businesses’ problems.
But first the report had to determine what a small business is, a question that is not as obvious as it seems.
The federal government’s Small Business Administration (SBA) measures business size by number of employees or the company’s value, depending on the sector. The Small Business Act, though, uses a measure that doesn’t exactly conjure visions of mom-and-pops: It says small businesses have fewer than 500 employees. Under the same rules, a microbusiness has fewer than five employees and requires $35,000 in capital or less to get going.
In New York State, small businesses are companies that employ fewer than one hundred people, while New York City’s Department of Small Business Services doesn’t set a number. Instead, it encourages any self-identifying businesses to seek out its resources.
Consequently, the MBPO’s March 2015 report called for a standardized measure of “small,” and the recommendations in its report are geared toward firms with 15 or fewer employees.
No matter how you define them, it’s clear that the not-so-invisible hand of the market is driving these firms out of business on Manhattan’s main streets. One problem? Stratospheric commercial rent increases. In 2014, the average asking rent in Manhattan was $65.14 per square foot. With ever-more high-income individuals flooding Manhattan, landlords are reluctant to offer 10- or 15-year commercial leases lest they get stuck with a lower-paying tenant as commercial land values in the neighborhood skyrocket.
Other problems, the report found, include businesses not having enough insurance, delaying tax payment, and under-budgeting for utilities. On the city side, some business owners in the report cited punitive agency inspectors who, instead of working with the owner to correct an issue, slapped the business with a fine.
Additional solutions don’t seem politically viable or aren’t effected at a scale that works.
A special tax for businesses in most of Manhattan eats into viability, too. In June, Mayor Bill de Blasio rejected the city council's proposal to alter commercial rent tax, an almost four percent surcharge on annual rent of $250,000 or more on businesses below 96th Street. As rents have risen, the tax threshold has stayed the same, and more businesses have become impacted. A bill (sponsored by Councilmember Dan Garodnick) that would raise the ceiling to $500,000 in annual rent didn’t make it into the final 2018 budget, though the item could be considered at a later date. If that limit were approved, the city would lose $52 million in revenue annually.
Zoning regulations encourage new development with huge storefronts that work for Chase and CVS but not for their independent counterparts. On the Upper West Side, though, neighbors are seeing mixed success from initiatives like a 2012 zoning change that limited storefronts to 25 feet, but don’t limit store size, as businesses are free to expand up or down as space permits.
But some advocates say these reforms don’t go far enough to stop business closures and the encroachment of chain stores.
“There is a crisis,” said Kirsten Theodos, cofounder of TakeBackNYC, an advocacy group for New York City small businesses. New York is losing 1,000 small businesses and 8,000 jobs per month. Theodos, who lives near the East Village, said all of this “fuels the hyper-gentrification and whitewashing of the city, a process that’s really accelerated over the past six years.”
Her group supports the Small Business Jobs Survival Act (SBJSA), a piece of local legislation that would set new rules around renewing commercial leases. Among other provisions, SBJSA would give commercial tenants, at minimum, a ten-year lease plus right to renewal and the option of arbitration to come to a new rent. The legislation is designed to slow, not stop, the rate of change in neighborhoods, and level the playing field for florists and bakeries competing for storefronts with Starbucks and Pottery Barn.
When the bill was first introduced in 2014, it had the support of 17 councilmembers—now it has the support of 26, or half the council. But in a city dominated by real estate interests, the bill is a nonstarter, Theodos explained. REBNY, the city’s largest real estate trade association, opposes the proposed rules, rallying around the idea that land values are subject to the “free market” and (incorrectly) deeming the rules “rent control.”
Even real estate boosters, though, acknowledge the downtrends in the market. According to REBNY, average asking rents in Manhattan this past spring fell in 14 of 17 of the borough’s top shopping strips compared with 2016 and record highs in 2014 and 2015. But the group maintains that a variety of factors set Manhattan apart from the suburbs, and grant the city a degree of immunity from experts’ dire predictions about the death of retail. In New York, REBNY says there are “strong market fundamentals,” including diverse food tenants, online retailers opening storefronts, and the eternal cache of a New York, NY address.
But to REBNY, doing well means collecting more rent. Fifth Avenue between 14th and 23rd streets (the Flatiron Fifth Avenue corridor) and Broadway between Battery Park and Chambers Street (the Lower Manhattan corridor) did the best, with ground floor rents rising by 18 percent to $456 per square foot in the Flatiron and 11 percent to $362 per square foot along the Lower Manhattan corridor. The report only looks at rents along main strips. Rents on side streets, according to the report, could diverge from the main drag; conversely, a gorgeous space on a prime corner may command greater asking rent and affect averages all along the strip.
It’s not only high rents and taxes that are driving businesses to close. Online shopping is slaying retailers big and small, in Manhattan and the suburbs and beyond. Right now, unchecked real estate speculation and limited protections for small-business owners mean that there is little protection against ultimately having a national bank and pharmacy on every corner.
With New York City’s subway system in a dire state—extensive delays, people getting trapped in subway cars, derailments—public officials have been scrambling to find a way to repair its aging infrastructure. Last week, Mayor Bill de Blasio proposed a "millionaire's tax" for wealthy city residents that would pay for infrastructure upgrades and reduced fares for other riders.
Now, Governor Andrew M. Cuomo revealed his own plan to raise funds and ease traffic at the same time: congestion pricing.
Congestion pricing was brought up by former Mayor Michael Bloomberg ten years ago but was quickly shut down because of concerns that it favored Manhattan residents. Cuomo is bringing it back as a solution to the city’s current transit crisis, according to The New York Times.
By putting tolls on roads and bridges leading into Manhattan, a constant funding stream will be created. It will also help to reduce traffic flowing into the city and on gridlocked streets. Congestion pricing is already in place in other cities like London, Stockholm, and Singapore.
Cuomo is piggy-backing on Bloomberg’s failed plan to create a new congestion pricing scheme that will win crucial support from stakeholders, including the State Legislature. “Congestion pricing is an idea whose time has come,” Cuomo said to the Times, though he added that his plan would be significantly different from Bloomberg’s.
Move NY, an independent transportation group, revealed its own congestion pricing proposal, offering a glimpse of what Cuomo’s plan may look like. Drivers would pay a toll of $5.54 in each direction for the four bridges that cross the East River into Manhattan, and also a toll to cross 60th Street in Manhattan northbound or southbound. The plan also proposes lowering tolls at other crossings. Move NY estimates that this system could yield around $1.47 billion in annual revenue, of which most would go towards repairing infrastructure. Alex Matthiessen, leader of Move NY, told The Times that group is talking with Cuomo's administration about developing the proposal.
While both de Blasio’s tax plan and Cuomo’s congestion pricing proposal have been getting attention, it does not solve the immediate issue of raising $800 million for emergency funds to finance immediate repairs on the subway. The state has already contributed $400 million and expects the city to fund the rest.
Soundview and LES
NYC Ferry seeks approval to build docks for two new routes
New York City’s ferry service, which has seen a surge of popularity amidst the city's current transportation crisis, is looking to add two new routes that will cater to the Lower East Side, the Bronx, and Queens, by next summer, as first reported by DNAinfo.
The city’s Economic Development Corporation (NYEDC) filed an application with the Army Corps of Engineers earlier this month to expand the NYC Ferry service by building docks along the Soundview and Lower East Side route.
The Soundview route will stop at Clason Point, East 90th Street, East 62nd Street, and terminate at Wall Street’s Pier 11. The Lower East Side route will make stops at Long Island City, East 34th Street, Stuyvesant Town, Corlears Hook, and also end at Wall Street. The application also included a request to construct 22 floating docks for a “homeport” and boat barge at the Brooklyn Navy Yard, a site that is going under extensive redevelopment.
The Army Corps is seeking comments and suggestions for the proposed new docks, one of which at the South Bronx landing is nearly 58 feet long. The responses will then be used to “issue, modify, condition, or deny a permit,” according to DNAinfo.
The ferry system is Mayor Bill de Blasio’s $55 million plan for a five-borough network that focuses on connecting residential areas to Manhattan’s business districts, as well as bringing increased transportation access to the city’s underserved communities. Rides are operated by Hornblower, a Californian company that has previously operated in New York before, and cost the same amount as a subway ride ($2.75). Current routes include an East River, Rockaway, and South Brooklyn. An Astoria ferry route is slated to begin on August 29.
This second phase of expanding NYC Ferry’s services, which only launched in May, comes after reports revealed the system had hit the one million rider mark in July. Both routes, if the application is approved, will begin next summer.
In 2015, Mayor de Blasio dedicated $115 million of funds to renovate the three million-square-foot site into a campus that would bring in commercial and industrial tenants. A former World War I military supply base, the Cass Gilbert–designed site was designed to foster an intermodal system of transferring goods between ships, trains, and trucks. The confusing circulation has previously deterred tenants from moving to the facility, and in an effort to attract more tenants, New York–based WXY is redesigning the campus's outdoor space.
WXY's new public space improvements, which span 12,000 square feet, include new seating, permeable pavement for improved stormwater runoff, and better wayfinding mechanisms for pedestrians to navigate between the ferry landing, parking, and the building. The existing landscape will be preserved where possible.
The city acquired the complex in 1981 and the New York City Economic Development Corporation (NYCEDC) is the steward of the terminal. The city has been trying to attract new tenants in its ‘Core Four’ industries: traditional manufacturing, advanced manufacturing, food manufacturing, and Made in New York (production of film, TV, and fashion). The terminal's floors are made out of reinforced concrete and can support loads of 250 to 300 pounds a square foot, making it well suited for manufacturing industries.
The renovation will bring an additional 500,000 square feet of manufacturing space by this fall. Rent hikes and small spaces have forced manufacturing companies out of the Garment District, and the city hopes the revival of Sunset Park’s many industrial spaces will aid the ailing industry, according to a New York Times report earlier this year.
“The Brooklyn Army Terminal has grown into a hotbed for modern manufacturing, diversified talent, and entrepreneurial zeal,” said NYCEDC President Maria Torres-Springer in a statement last year.
The redevelopment of BAT joins neighboring Industry City and the South Brooklyn Marine Terminal along the Sunset Park waterfront.
Manhattan Borough President Gale Brewer formally announced today that she opposed the city’s proposal to rezone East Harlem; the rezoning would bring more high-rise residential development to the area.
In a detailed report, Brewer cited the proposed concentrated density along Third and Park Avenues, a lack of new affordable housing units, and a failure to preserve existing affordable housing units as reasons for rejecting the proposal. She also criticized Mayor Bill de Blasio’s administration for not taking into account the concerns raised by Community Board 11.
"We are left with an incomplete picture of what the impact of this application will be and how we can ensure the better future for the community promised by the applicant," Brewer wrote. "Ultimately, the current proposal falls short in both the land use and the programmatic categories."
The rezoning proposal would allow the buildings in a 96-block stretch of East Harlem to be built higher in order to incentivize development in the neighborhood. Consequently, according to Brewer, the plan would enable building forms that would tip the balance towards market-rate development and not affordable housing.
The proposal has incited backlash and controversy from the neighborhood’s residents; a Community Board 11 meeting in June descended into chaos when residents stormed the stage. Locals fear that rezoning will only expedite the rapid gentrification that is spreading.The rezoning is part of Mayor de Blasio's broader push to create or preserve 200,000 units of affordable housing over the next decade.
But East Harlem, while a neighborhood with one of the highest concentrations of affordable housing, has been steadily losing its affordable housing stock. About 80 percent of the people who live in the neighborhood live in some form of regulated housing and approximately 12,000 households that face severe housing needs, according to the East Harlem Neighborhood Plan (ENHP).
The ENHP was submitted to the administration in 2016, supported by Council Speaker Melissa Mark-Viverito and Brewer, and focused on a bottom-up approach to de Blasio’s plan.
“Here, the community gave extensive, thoughtful and informed input, but the administration could not see its way to support significant elements of the community’s recommendations, which forces me to recommend a disapproval of the application,” Brewer said.
Although Brewer’s lack of support is non-binding, the plan is expected to undergo changes before making its way to the City Planning Commission and City Council.
Action Plan Onboard
Subway service stinks and the MTA has a new plan to fix it
- Speeding up the replacement of the 1,300 most troublesome signals (40 percent of signal mechanisms are more than 50 years old)
- Starting a Emergency Water Management initiative to seal leaks and clean grates
- Increasing the number of train car overhauls from 950 to 1,100 per year
- Creating a new MTA app and a separate online dashboard to keep riders informed on MTA activities and improvements (the dashboard will be available in the next month to six weeks)
- Initiating a pilot program to remove some seats from select cars on the Shuttle (S) train between Grand Central/42nd and the L train
- Adding seven more EMT teams at various stations to handle sick customers
- Initiating a public awareness campaign to stop littering on the tracks, which can lead to track fires
- Increasing the rate of station cleaning from every six weeks to four weeks
- Adding 12 emergency teams to 12 locations to speed up incident response times
- Eliminating recorded announcements on subway cars