The near-total shutdown of New York City shops and restaurants during the coronavirus crisis will likely be felt for years to come in the retail real estate world.
In the short-term, landlords and tenants will have to come up with creative solutions to help commercial tenants back on their feet, according to some of the city’s top retail brokers who discussed the state of the market for the latest installment of TRD Talks Live.
The definition of “short-term” is up for debate.
“I would describe short-term in this case as being years and not months,” said David Firestein of the Shopping Center Group.
Firestein joined Jeffrey Roseman of Newmark Knight Frank and James Famularo of Meridian Retail Leasing on Wednesday to discuss the way the coronavirus pandemic is affecting the retail business. The Real Deal’s Hiten Samtani moderated the panel.
Jamestown president Michael Phillips recently said he believes the days of a landlord “as an overlord to collect rent” are over.
Firestein said that for next two or three years, it’s likely landlords will have to accept a percentage of their tenants’ profits in lieu of straight rent payments, in order to help shops get back into the red.
Roseman said thought leases going forward will include clauses that provide relief for tenants should another pandemic hit. That, he said, will make the leasing process even more complex.
“Leases were complicated enough as 100 pages,” he said. “Now there’s going to be a lot more pages.”
The top deal makers said they all thought sit-down dining restaurants will face stiff challenges returning to normal. Famularo said most restaurant owners he spoke with are planning to reopen at 50 percent capacity.
He said they planned to supplement lost income by ramping up their delivery services. And in the meantime, the State Liquor Authority has provided some relief by allowing restaurants to deliver alcoholic drinks.
“If you want a mixed-drink you can order it from your favorite restaurant and they’ll deliver a cocktail or a beer or a mixed drink,” he said.
The three veteran brokers said that with so much turmoil in the market and lots of vacant space likely to become available, landlords and tenants will need their services more than ever as the city begins to reopen.
They acknowledged the challenges for young brokers to make it through the tough market, but said it presents an opportunity to reach out and find the new tenants who will be looking to break in and lease space while prices are down.
Many retailers and landlords are looking for relief from different levels of government. Brendan Wallace of Fifth Wall Ventures recently called on the federal government to provide a $30 billion bailout to the retail industry.
Firestein said he expects President Trump is likely sympathetic to the challenges Manhattan retail landlords are facing.
“My guess is this president probably talks to some of the major real estate guys in New York maybe on a weekly basis,” he said.
Contact Rich Bockmann at [email protected] or 908-415-5229.