High rents doom East Village retailers

Feb.February 04, 2009 03:54 PM

Tribe, the decade-old East Village bar, has closed, one in a slew of area businesses that have recently succumbed to a potent cocktail of skyrocketing rents and lower profits in the economic slowdown.

Tribe’s final day was last Thursday, said owner Matt Wagman, senior partner at Riteon, a partnership that operates four other bars in Manhattan. While Tribe drew loyal crowds and “always turned in really nice numbers,” the bar closed after negotiations failed with landlord Tara Allmen, who had asked for a “100 percent increase” in rent when Tribe’s 10-year lease expired Dec. 31, Wagman said.

Allmen, a physician, inherited the building from her mother, Renée Allmen, along with several other East Village properties, and recently completed renovating the four residential spaces in the building. She called Tribe “an eyesore.”

“I want a classier place,” she said, adding that Tribe “was not going to enhance the aesthetic of the building.”

Asking rent for the space, located at 132 First Avenue at St. Mark’s, is $150 per square foot, according to Daniel Wolf, a managing director at Lansco Corporation, who was familiar with the Dimucci Partners listing. Allmen said she is close to inking a deal with a new tenant.

In recent months, many nearby businesses have closed. They include East Village stalwart Love Saves the Day, famous for its cameo in the Madonna film “Desperately Seeking Susan,” which announced it would close in January, though a satellite branch in New Hope, Penn. will stay open. Other casualties include Stanton Street vintage boutique Dulcinée, music stores Etherea Records and Mondo Kim’s, and 45-year-old shoe repair shop A. Fontana. The East Village neighborhood blog EV Grieve recently counted 21 empty storefronts along Avenue B.

Many businesses in the area are falling victim to slowing sales in the economy, which make it hard to pay steep rents, said Robin Abrams, executive vice president at the Lansco. “A year or two ago, as the area gentrified and there was lots of new development, the asking rents significantly increased,” she explained. “New tenants were paying very aggressive rents. With the economy now changing, it’s becoming very difficult for [businesses] to survive down there.”

But high rents are also problematic for longstanding businesses, like Tribe, which moved to the area when rents were much cheaper and cannot afford to stay when their leases expire, despite brisk business.

Tribe attracted a loyal following and was “pound for pound, one of the greater performers in our portfolio,” said Lansco’s Wagman, who is listing a retail space in the area. But at just under 900 square feet, the bar fit only 75 people and could only turn a profit with its rent at a certain price point.

“With 800 or 900 square feet, you have to have a cost-structure a certain way or it won’t work,” he said.

Other examples include Vlada boutique, previously at 103 Stanton Street, which has now been replaced by trendy hair salon Pimps & Pinups. The boutique Shop moved after a decade at 105 Stanton Street to a new location at 94 Orchard Street, and was replaced by the designer boutique Yumi Kim.

Both Shop and Vlada were “good stores,” Wolf said, but “couldn’t renew because they couldn’t afford to pay the rent,” he said. Many have relocated to what he calls the “Lower Lower East Side,” below Delancey Street, where rents are more in the $50 to $75 per square foot range rather than $100 to $150.

The problem is not limited to the East Village and the Lower East Side. It’s so widespread that in June 2008, local politicians introduced the Small Business Preservation Act, sponsored by City Council member Robert Jackson, which would provide more rights for commercial tenants at lease renewal time.

But it’s especially noticeable in the rapidly gentrifying East Village, where rents in some spots have quintupled in the past five years, Wolf said, thanks in part to the new Whole Foods and the John Varvatos store that replaced CBGB’s on the Bowery. “Five years ago, it was more pipe shops and sex shops,” he said. Now, “there are a lot more national tenants. That will bring the rents up no matter what.”

That means smaller businesses like Tribe get hit hard, said Wagman, who moved to the East Village in 1988. “One of the great things about the East Village was how many small places like Tribe existed,” he said. “Now that the Chipotles and banks and Starbucks have raised the bar, it makes it exceedingly difficult [for smaller places to operate.]”

Rents in the area are softening as the economic downturn strengthens its grip on Manhattan, but many landlords don’t seem to have accepted that fact, Wolf said. Many landlords are still asking top dollar, he said.

“We’re seeing a big disconnect between what asking rents are and what the deals are getting done at,” Wolf said. “Landlords aren’t really scared yet.”

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