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Atlantic Yards/Pacific Park graphic: what's built/what's coming + FAQ (pinned post)

At City Council hearing on enhancing local retail, some dramatic Brooklyn statistics and a cameo for Atlantic Yards

The stress felt by New York City's small businesses was the subject of a New York City Council hearing and report Planning for Retail Diversity issued 12/14/17, with various solutions suggested, reflecting the diverse challenges felt, from 1) Manhattan corridors saturated by chains, 2) gentrifying districts facing landlord maneuvering (as near Atlantic Yards/Pacific Park), and 3) more neglected areas starved for retail.

There's definitely a problem. See for example, the web site Vacant New York, focusing on empty Manhattan storefronts, and the more generally elegiac blog--and book--Vanishing New York. And note the numerous empty storefronts in prosperous areas of Brownstone Brooklyn.

Among the Council's suggestions:
  • have the Department of Small Business Services (SBS) take a more comprehensive role in planning, registering storefronts vacant for 90 days;
  • consider allowing limited commercial activity on residential blocks to open up cheaper space
  • consider bringing retail to New York City Housing Authority residential superblocks 
  • requiring commercial space in new developments (extending a policy response to the unwise initial rezoning of Brooklyn's Fourth Avenue) 
  • expand beyond Upper West Side requirements to restrict the size of storefronts (thus deterring chains)
  • consider zoning restrictions on chain stores and restaurants
  • study am inclusionary zoning bonus to stimulate affordable commercial space
  • strengthen & expand the FRESH program proving zoning and tax benefits to new grocery stores in underserved neighborhoods
  • prioritize affordable local retail space in city-sponsored developments 
  • help local nonprofits develop affordable commercial spaces in underserved areas
  • help fund for community developers to rede­velop vacant or underutilized commercial spaces
  • create a new tax abatement and/or direct subsidy to incentivize property owners to offer affordable long-term leases
  • consider a direct subsidy program to retain longstanding neighborhood businesses
  • reform the Commercial Rent Tax in Manhattan (which has happened for some small businesses)
Other solutions proposed by advocates, noted below, include streamlining regulations and penalizing landlords for excessive vacancies.

As the report, Planning for Retail Diversity (also at bottom) indicates, in hot neighborhoods, "rising rents and competition with chain stores and businesses focused on high-end consumers and tourists are squeezing out longstanding local retailers and restaurants and making it difficult for new small businesses to find space."

And while gentrifying and non-gentrifying neighborhoods face different pressures, all are affected by national trends, notably the growth of e-commerce.

A trend of growth

The report offers some useful context, citing an enormous growth in retail and restaurants from 2002 to 2012, a reflection of more people with money to spend and an explosion of tourism.

"In Brooklyn, the number of retail establishments grew by over 30%, and eating and drinking places grew by nearly 90%," the report states. Note the sea of green in the graphic at right, indicating growth in retail and restaurants, while the red in Manhattan indicates loss.

Departing Council Member Dan Garodnick, who chaired the hearing, noted on Twitter that the Council had compiled data that the Department of Small Business Services didn't have.

"The growth in the number of retail and restaurant establishments has been strongest in outer borough neighborhoods like Williamsburg and Prospect Heights that have seen a new wealthier demographic arrive along with major real estate reinvestment and development," the report states, "and in areas like Corona, Flushing, and Sunset Park that have seen tremendous growth in immigrant population and entrepreneurship."

Meanwhile, chain stores and restaurants have expanded into New York, and are considered by banks a lesser risk, thus inducing developers to lease to such entities, even to give them below-market rents.

The growth in rents means that neighborhood retailers and restaurants may face "shocking" increases when trying to renew their leases, according to the report.


Brooklyn boom problems

The report notes that landlords may keep properties vacant while waiting for a big-ticket renter:
Warehousing empty retail spaces is also an issue in rapidly gentrifying neighborhoods, as vacant storefronts in these neighborhoods tend to remain empty for longer on average than in other neighborhoods. Representatives for the North Flatbush Avenue BID describe [p. 93 of this 2016 document] this pattern in their rapidly growing area of Brooklyn where some “owners find it more advantageous to hold-out on leasing spaces as they warehouse available property for future opportunity rather than leasing to local entrepreneurs.”
Indeed, note that Prospect Heights and Clinton Hill experienced some of the most rapid growth in small retailers and restaurants.

Coping with that growth

At the hearing, Ty Beatty, acting District Manager of Brooklyn Community Board 6, which includes Park Slope and nudges up to the Atlantic Yards/Pacific Park site, said that empty storefronts result in part from landlords who are overcharging for ground-floor retail spaces. He called on the Council to form a citywide working group to examine commercial rent regulations, fines for extreme vacancy, incentives to lease spaces, and help in matching tenants and landlords.

"Far too often, we hear about one project destroying our community," he said, perhaps echoing some rhetoric about Atlantic Yards. Rather, he said, communities are plagued by blight from empty stores.

Real estate broker, historic preservationist, and CB 6 member Victoria Hagman said at the hearing that vacancy rates were worse then ever in the last 15 years, creating an "empty storefront epidemic that plagues Smith Street and Atlantic Avenue and many other parts of Brooklyn."

She suggested the doubling or tripling of rent was "triggered by the large amount of new development happening in the area and creating available spaces for large chain retailers." She cited Atlantic Yards as well as the Downtown Brooklyn rezoning. (Note that the developers of Atlantic Yards/Pacific Park have said they're avoiding chain stores.)

While small property owners couldn't afford to keep storefronts vacant, large developers might have a different business model, allowing them to wait. "These large real estate development corporations' business model is built on speculation, driving up prices and instigating zoning changes for their benefit alone without investment or benefit to the local community," Hagman said, citing the role of Thor Equities.

Moreover, some national businesses use brick-and-mortar spaces "as part of their marketing campaigns without having to reach return or profit benchmarks," she noted.

Queried by Garodnick, she said that landlords, for example in Gowanus, won't provide 10-year leases, which restaurants need to justify their investment for a buildout. Other landlords await rezonings.

Other solutions: regulatory reform, tax incentives, penalties for vacancies

Kenneth Adams, dean of workforce and economic development at Bronx Community College, and the former president of Empire State Development (and a Brooklyn resident), offered a different suggestion in a Daily News op-ed:
If elected officials want to show support for mom-and-pop retail, how about a New Year’s resolution to form a Regulatory Review Commission — stacked with independent retailers — to streamline, update and coordinate this daunting mess of rules and regulations that overwhelm the intrepid entrepreneurs that make our New York City neighborhoods great?
At the hearing, he also suggested an incentive program to offer tax credits to landlords offering below-market rent.

The Municipal Art Society recommended that the city collect far more detailed information about rent levels and vacancies, and as part of the United for Small Business NYC coalition (USBnyc), led by the Association for Neighborhood & Housing Development (ANHD), supports "penalizing landlords who intentionally warehouse commercial properties for more than six months," as well as a new nonprofit commercial development fund.

Indeed, the ANHD observed:
Currently, no penalty exists for property owners who neglect vacant properties or intentionally leave space vacant. This leaves storefronts vacant and businesses who can’t afford high rents priced out. In order to create commercial affordability, the City must ensure that landlords who warehouse properties are held accountable, whether through fines or increased taxation on properties left unrented for over six months.
It also noted:
In order to create truly equitable economic development, it is crucial to protect New York City’s small businesses, especially those owned and operated by immigrants and people of color. That includes more funding for resources for existing small businesses, fines for landlords who raise rents and then leave vacant storefronts empty, and the creation and maintenance of affordable commercial spaces. The displacement of neighborhood institutions not only threatens New York’s identity, but also eliminates jobs, community spaces, and affordable resources in low- and moderate-income communities of color.
Brooklyn Council Member Brad Lander recently tweeted that he was working with state legislators who will introduced legislation in Albany to give New York City the authorization to create a create a property tax exemption for landlords who offer independent small businesses a long-term lease with fair increases and a fair renewal clause.

Comments

  1. Anonymous11:24 AM

    Nice to see that elected officials are looking seriously at this problem. In addition to the empty storefronts, the cost of living for individuals, fueled in part by a lack of commercial rent control, has gone up considerably in the last 5 years. Hopefully there will be some action on this soon.

    ReplyDelete

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