Rents have soared along the retail corridor on Broadway because retailers are cashing in on a changing neighborhood.
Rents along the strip on Broadway between Chambers Street and Battery Park increased 39% from spring 2015 to spring 2016 according to the latest Real Estate Board of New York Manhattan Retail Report. The opening of Brookfield Place and Westfield Mall along with a surge in residential development is transforming the downtown Broadway retail corridor by bringing in chains like Zara and Anthropologie. Tourists lured by the National September 11th Memorial and Museum is another factor in spurring to push through huge spikes in rents.
“You’ve got a residential population that you didn’t have before,” said John Brod, partner at real estate firm ABSRE. “You have a slew of hotels which you didn’t have before. And you’ve got two transit hubs, the Fulton Station and the Calatrava. Between the two they connect to every subway in New York City and every path to New Jersey.”
The rent increase along with the opening of Westfield Mall are very recent additions to the area. The Downtown Alliance, which manages the Downtown-Lower Manhattan Business Improvement District (BID), says that a recent expansion of Zara and the commitment of Anthropologie to move to the area are signs that business is doing well. Regarding the rent increases affecting large and small businesses, they said only time will tell.
“Our hope is that the added traffic will complement and benefit all businesses,” said Elizabeth Lutz, director of public affairs at the Downtown Alliance. “I imagine we’ll have a better idea of the impact in the coming months.”
This area on Broadway has seen an explosion of real estate. In March 2015 Brookfield Place opened with 40 new stores and in August the Westfield Mall opened with 125 new stores. There has also been a steady increase in tourism as well as an increase in residential and commercial development since 9/11, creating a new hub for commerce in an area that used to be relegated purely for the financial business. Chains and restaurants are more likely to be able to afford the neighborhood. The area is less affordable for small businesses and mom-and-pop shops.
One such store that shuttered in June 2016 due to the rent increase is Wilner Chemists, which was located at 253 Broadway. Wilner had been in its Broadway location for 18 years. Owner Arnold Gitomer still has a location open on Park Avenue and 41st Street. Wilner Chemists is an upscale mom-and-pop pharmacy selling high-quality vitamins and supplements. Gitomer says that the customer base in the area was never Wilner’s target clientele, but the increase in rent made it harder to bypass that.
“Broadway is Broadway,” said Gitomer. “It’s a lot of people but it’s not the type of people we needed to shop in our store. It was always like that but we had lower rent and we were managing.”
The rent increase in the area was the final straw. Wilner wasn’t catering to tourists looking to shop at fast fashion stores and malls. Their customer is the local New Yorker with a disposable income.
“The rent going up and it’s like if you’re selling Mercedes in a depressed area, who’s gonna get them? If you wanna go to the depressed area you gotta sell Chevys,” he said. “We were selling Mercedes in an area with people who wanted Chevys.”
Store-owner Jennifer Cattaui has also noticed an increase in vacancies near her location on Warren Street off of Broadway. She owns the children’s store chain Babesta, and has a new location in Brookfield Place. Her lease is still under the terms that were negotiated years ago so she has yet to experience the increase. She says that the volume of tourists in the area isn’t trickling down into side streets and the increase in rent is misplaced.
“I think to have rents at the level that they are, I think it does a significant disservice to the area and to the local people,” said Cattaui. “There isn’t the business, there isn’t the volume to really have that level of rent make sense.”
She said in the past year she’s seen an increasing number of empty stores on Reade Street, Duane Street and Greenwich Street, all small streets off of Broadway below Chambers. Restaurants like The Harrison and Raccoon Lodge have closed as well as retail stores like Petticoat Junction and Pookie and Sebastian. Though big box chains inside malls can withstand an increased rent, Cattaui says small businesses in her quiet neighborhood can’t.
“They really are rents that would indicate volume and Brookfield, Westfield and any sort of aggregate, they can have a little more pronounced network effect because they are kind of collectively in one building,” said Cattaui. “I believe that there is an argument that their rents could be a bit higher because of the very pronounced network effect.”
- Willner Chemists, 253 Broadway, closed June 2016
Willner Chemists opened in 1911 as a traditional pharmacy. They closed their Tribeca location earlier this year but will keep their flagship store uptown near Grand Central.
- Kiki de Montparnasse, 102 Franklin Street, closed April 2016
The upscale lingerie store was only open for three months before its closure. According to a comment on their Facebook page, they did not pay their bills.
- Pookie and Sebastian, 147 Reade Street, closed April 2016
The small chain Pookie and Sebastian lasted a little over a year on the low traffic Reade Street. They still have three other brick and mortar stores in Manhattan.
- Manhattan Beauty Supply, 121 Chambers Street, closed March 2016
Manhattan Beauty Supply was in its Chambers Street location for 35 years before it closed last March.
- Raccoon Lodge, 59 Warren Street, closed December 2015
The 33-year-old dive bar closed after its building was slated to be demolished. Along with Raccoon Lodge, eight other stores on the block closed.
- HomBom Toy, 345 Greenwich Street, closed May 2015.
After three years the children’s toy store closed due to lack of traffic. Their two locations on the Upper East Side and the Upper West Side are still open.
- Petticoat Lane, 149 Reade Street, closed April 2015
Consistently voted one of the best lingerie stores, Petticoat Lane closed in April 2015. Owner Jennifer Urquhart told the Tribeca Citizen that she wanted to open in a different location in Tribeca but another store has yet to open in the area.
- The Harrison, 355 Greenwich Street, closed December 2014
The Harrison was the first restaurant to open in the area after 9/11 and 14 years later it closed it’s doors. It’ told GrubStreet that it was due to rent hikes.