BY Aline Reynolds
The comeback from a deep recession is proving tough for small businesses in Lower Manhattan.
Emil Duval, who runs a furniture store at 111 Fulton Street, is relinquishing his lease only a few months after he signed it. “To say that I’m very impressed, I’m not,” he said. “Business is slow.”
Duval formerly sold furniture in a by-appointment-only showroom at 160 Pearl Street before moving into the 3,000 square foot space on Fulton Street in May. But, as he struggled to keep up with his $15,000-per-month rent, things didn’t work out as he had hoped.
“Maybe we’re on the wrong street,” he said, pointing to the large tourist population in the area.
Since his Fulton Street business isn’t making it, Duval plans on opening another showroom at a new Tribeca location.
Help may be on the way for retail stores like Duval’s if government-sponsored measures are enacted quickly.
“For a long time, there has been concern about the loss of local retail,” said State Senator Daniel Squadron. “But we have not seen a coordinated effort to solve the problem.”
Squadron teamed up with N.Y. State Senator Shirley L. Huntley (D-Jamaica) and fellow members of the N.Y. State Senate Committee on Cities to create “New York Retail: Serving the Public,” a report that gives insight into how small businesses can stay afloat amid escalating rents and competition among “big box” stores.
The report, released last week, stems from a public hearing held last September, where elected officials and community members from around the state discussed the hardships of creating diverse retail.
Possible solutions include providing rent abatement to Lower Manhattan retailers, creating a relocation and assistance fund for small businesses displaced by large ones and implementing retail zoning. The purpose of zoning would be to “limit the size and use of retail stores in certain districts in order to maintain an area’s character and ensure pedestrian-friendly streets,” according to the report.
“The Committee finds that the biggest challenges facing businesses in New York’s urban communities are high commercial rents, lack of coordination/information between state and local government and retailers, and adverse tax policy,” the report states.
Having invested $500,000 in out-of-pocket expenses, Duval is just about breaking even with the current level of sales. Duval’s landlord at his current location offered to lease him the remaining first floor and basement, totaling around 15,000 square feet of space. But he couldn’t afford it up front, and he’s not willing to gamble on whether he could pay it back.
“I don’t get to play with extra cash to do something like that,” he said. “It took my friend, who is a business owner, two-and-a-half years to get a loan.”
The retail report also suggests size caps on commercial properties, and to counter the proliferation of “formula retailers”— the big-box stores that some say have an automatic advantage over small businesses in lease negotiations. Large businesses in Downtown, below Canal Street, include chains like Barnes & Noble, Borders and Bed Bath & Beyond.
“Big businesses have money that can float the rent,” explained Charles Schwartzapfel, owner of an architectural and building contractor firm. Schwartzapfel recently had to move his offices to Long Island because he could no longer afford his lease at 25 Peck Slip.
“A landlord will sometimes choose a chain over a locally owned retail shop because the chain can the pay higher rent,” Squadron said.
Competition with brand names can also do small businesses in.
“We live in a much more heavily branded and marketed society than 40 or 50 years ago,” Squadron added. “It gives national brands a leg up.”
Mom-and-pop shops can overcome the brands’ advantages by being part of a retail strip that “has its own reputation and is trusted by local community,” he added. Business Improvement Districts, such as the Downtown Alliance, can help detect and solve problems small businesses encounter.
The Alliance helps new stores get their footing in Lower Manhattan by way of promotion. “We engage in social networking, such as Twitter and Facebook, to…help promote any new business that opens Downtown,” said Jeff Simmons, vice president of communications for Downtown Alliance. In supporting Crumbs, the cupcake shop, at its new Downtown location, for example, “we make sure residents, visitors, workers know that they have weekend hours,” he said.
Leasing activity on the rise
On the upside, overall leasing activity in Lower Manhattan is on the rise, according to the Alliance’s Real Estate Market Overview Quarter Two 2010 report. As of late July, the amount of space rented to commercial tenants below Chambers Street has risen by 28 percent from 2009, or 1.4 million square feet, according to the report. Businesses moving Downtown or renewing their leases this year include the New York Daily News, Healthfirst, Kenyon & Kenyon and Broadcast Music, Inc.
“New and pending leases show that Lower Manhattan’s major tenants remain committed to the area while creative services firms are increasingly drawn to it,” according to the Alliance’s report.
As for retail space, the rent prices for the Broadway corridor from Battery Park to Chambers Street were stable over the last quarter, averaging $175 per square foot in the second quarter of 2010. While sixteen closed, including Samuel’s Hats and Metro PCS, 22 new retail businesses opened.
One of the new retails on the block is Vietnamese Sandwiches, at 164 Pearl Street.
“We just opened one month ago,” said manager Jay Chan, who reported that business has been steady. “So far, so good,” she said.
Squadron stressed that, despite the good news about lease activity, the small businesses that are struggling still need assistance from government agencies and the Downtown community.
“The recent increase in leasing activity Downtown is a great testament to how hard the community has been working to revitalize Lower Manhattan,” said Squadron, in response to the Alliance’s report.
“But the fact is, small business owners in Lower Manhattan and throughout the state are still struggling, and this retail report is one of the steps we’re taking to make sure that local retail continues to play an important role in the redevelopment of Lower Manhattan and across the state,” he added.
“As people move into the area, they’re expecting more [retail],” said Meg Ross, an independent business consultant in the Downtown area. Ross said she has to walk several blocks just to purchase groceries or clothes.
“The community needs more diversity. I think a lot of people are betting on it to happen.”
