Even if the Metropolitan Transportation Authority will get the Second Avenue subway up and running by January 1, it would make little difference to long-time business owners on the East Side.
Almost-endless construction has already changed deeply the economy of the area. Some businesses had to re-brand or relocate, and many had to closed down. Others have stayed open, resisting years of disruption and gutted profit. But for those who stayed, the reward might still be out of reach for a long time.
Sammy Musovic, the owner of Vero, a wine bar located on Second Avenue between 77th and 78th streets, said he counted at least 30 businesses that called it quits in recent years. Well-established restaurants such as Brother’s Jimmy, Big Daddy’s, Bocca and MXCo are in the list.
“Every couple of months, I see a ‘For Rent’ sign,” Musovic said, “And it’s not gonna stop.”
Musovic, who has been lived and worked in the neighborhood for 14 years, is among the many entrepreneurs who hoped the Second Avenue subway would boost their business, but now are struggling to recover from meager earnings suffered while waiting for the construction to complete.
“We’ve waited and waited knowing that ultimately there will be a payoff,” said Musovic, who leads the Second Avenue Business Association, a coalition of entrepreneurs formed in 2008 to deal with the construction’s impact.
The payoff will come, but not immediately. Terrence Lowenberg, principal at Icon Realty Management, a developer and managing company, said it will take up to two years before the scars of construction will disappear, allowing retail to get back on track.
The MTA began building the new subway in 2007. With authorities estimating that 200,000 additional people will be walking in the neighborhood every day once the subway opens, Musovic thought it a good idea to be waiting a few years. By his own estimate, he predicted his business would grow by 20 percent once the subway opened.
Little did he know that the end of construction would be delayed several times. Eager to fill up his wine bar with new customers, all Musovic could see instead was a series of roadblocks and scaffoldings, and once usual customers never coming back. Between 2007 and the present, his business lost 35 percent of its revenue.
Storefronts disappeared behind road fences and businesses began closing down. His two sons, Sammy Jr. and Johnny, who own two restaurants in the neighborhood, have reported sagging revenues as well.
At a recent press conference held inside at Vero, Musovic, said he’s frustrated delays in the subway opening will spoil yet another holiday season.
Meanwhile, well-financed retailers are rushing to sign last-minute leases near the new subway entrances betting on the long-awaited boom.
Ripped Fitness just signed a new lease for a space at 1432 Second Avenue, nearby the new 72nd Street subway entrance, paying $140 per square foot. Another gym, District Elite Performance, has recently signed a 10-year lease for a location at 246 East 94th Street, between Second and Third Avenues, paying $87 per square foot. Retail experts say the company scored a good deal, as retail rents will soon double.
Real estate firms that deal with retail space are riding the wave of excitement.
“We’ve been seeing a lot of action,” said Zach Diamond, an associate at Winick Realty Group. Diamond said his locations showings on the Upper East side have gone up significantly in recent weeks.
“Once the subways open and the views are no longer obstructed more tenants will jump on the opportunity to be on the Upper East Side,” he said.
Musovic, who has lived on the East Side for longer than a decade, said the only businesses to be safe from rising rents are big chains restaurants like McDonald’s and Chipotle, or banks. But small business owners are facing major difficulties in keeping up with the rent hike.
According to Census data, the average rent increased in all the census tracts near the Second Avenue subway route, with the exception of the five blocks on Second Avenue included between 69th and 74th streets, where the construction has dragging on until recently.
Depending how close they are to the new subway entrances, the cost of retail space might vary widely. Locations along Second Avenue between 80th and 81st streets are leasing for around $175 per square foot, but storefronts on the Northeast corner of 80th street are priced around $275 per square foot.
Between 74th and 76th streets, retail rent starts at $140 per square foot, but gets as high as $200 per square foot for commercial spaces located on corners. Between 83rd and 84th streets, close to the 86th Street station, Winick is asking over $275 per square foot.
Hal Shapiro, senior director at Winick, said the base price for retail space will top $200 per square foot across the board.
Because of the lack of efficient mass transit in the past, the wealthiest Upper East Side crowd has traditionally avoided the blocks around Second Avenue. But with the MTA finally delivering on its promise to have the Q train running to and from 96th Street, things will soon change.
“Once all the barricades and staffing areas are removed, retail will come back, business will pick up,” Shapiro said.
Nearly 21 million people walk out the subway station at 86th street every year. A portion of those people will be walking in and out the Second avenue subway, fueling the local economy, experts say.
“Retailers look at density, income levels, mass transportation hubs. It’s about sales volume and what retail can generate,” said Andrew Mandell, a managing partner at Ripco Real Estate Corp..
The Upper East Side is one of the richest and more densely populated areas in the country. The neighborhood’s average yearly household income is about $195,000 per year. The blocks between 80th and 87th streets has a density of nearly 147,000 people per square mile, compared to the borough average of 71,000 per square mile.
“Savvy retailers recognize the long term benefits to be around these subway entrances,” Mandell said. The vacancy rate, which is now around 2 percent, is dropping rapidly.
But as new well-financed retailers set foot on Second Avenue, long-time businesses that did all-in on the subway opening are now suffering more than ever.
Musovic resisted the temptation to reopen his business somewhere else, in part because of the resolve on of his family members.
“We got ourselves so established on Second Avenue, committed a lot of time of resources in the area, that we couldn’t see ourselves going any place,” said Sammy Musovic Jr., who runs Soujour, a tapas bar located on 79th Street, near the corner with the avenue.
“Fortunately for me, I’ve been able to weather the storm,” Musovic said, “But these other guys, the small business owners can’t no longer hold on.”