The Real Deal New York

Retail brokers expect sharp vacancy rise in new year

October 13, 2008 01:54PM
By Adam Pincus

The weak economy has New York City retail experts anticipating a larger-than-normal rise in store vacancies in the first quarter of 2009 after what is expected to be an anemic Christmas shopping season.

Robin Abrams, executive vice president of the Lansco Corporation, said she expects more retail vacancies in the months immediately following the holidays.

“I think there will probably be more,” she said, citing the recent stock market pummeling and the bleak economic news as the key factors that will drive up store vacancies.

Gary Trock, senior vice president of the New York tri-state region retail services team at CB Richard Ellis, said he believes the financial sector layoffs will hurt retailers in the city.

The jobs cuts “will severely affect Christmas season. That will have a strong effect on the nationals,” he said. But, he said, local, “mom and pops are getting hammered.”

Retail reports showed a wide-spread drop off in consumer spending nationwide last month at stores ranging from Nordstrom’s to Target.

Historically, store vacancies tend to increase in the first quarter as weak retailers close shop after making it through the holiday season. That phenomenon even holds true when the economy is solid.

In the first quarter of 2007, for example, availabilities rose in three of the five top submarkets in Manhattan — Fifth Avenue from 42nd to 49th streets; Fifth Avenue from 49th to 60th streets; and in Soho, according to data from Cushman & Wakefield. In the same period, vacancies fell on Madison Avenue and on the Upper West Side.

In the first quarter of 2008, the retail vacancies rose or remained the same in all the submarkets, according to the data.

Trock said the emerging retail markets in Manhattan are especially vulnerable.

“The growing markets we see in the Lower East Side, the Bowery, the West Village … Washington Heights, those markets are the ones that are going to get hit the most. They will get more vacancies,” he said.

Steven Kamali, president of restaurant consultant firm Stevens & Company, said he expects to see bars and restaurants in the Financial District hit especially hard.

“You can always assume after the holiday season there is an uptick in the loss of businesses and leases by restaurants and bars and night clubs. I assume that is going to happen on a large scale because of the financial” turmoil, he said.

The outer boroughs have already seen stores packing up.

Joe Hentze, senior broker at Hentze-Dor Real Estate, based in Long Island City, said he has already seen stores go out of business on the main shopping thoroughfare in Astoria.

“As I drive around we see more ‘for rent’ signs on Steinway. Every day another sign goes up there,” he said. “You do see a lot more space coming available — especially mom-and-pop stores.”

He said there is not a glut of stores on the market now, but noted that: “You are going to see more space become available … Christmas is a make or break for a lot of retailers.”

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