Retail Chains Abandon Manhattan: 'It's Unsustainable'

[bluewater]

For years, Bryant Park Grill & Cafe in Midtown Manhattan has been one of the country’s top-grossing restaurants, the star property in Ark Restaurants’ portfolio of 20 restaurants across the United States.

But what propelled it to the top has vanished.

The tourists are gone, the office towers surrounding it are largely empty and the restaurant’s 1,000-seat dining room is closed. Instead, dinner is cooked and served on its patio, and the scaled-down restaurant brings in about $12,000 a day — an 85 percent plunge in revenue, its chief executive said.

Five months into the pandemic, the drastic turn of events at businesses like Bryant Park Grill & Cafe that are part of national chains shows how the economic damage in New York has in many cases been far worse than elsewhere in the country.

In the heart of Manhattan, national chains including J.C. Penney, Kate Spade, Subway and Le Pain Quotidien have shuttered branches for good. Many other large brands, like Victoria’s Secret and the Gap, have their kept high-profile locations closed in Manhattan, while reopening in other states.

Michael Weinstein, the chief executive of Ark Restaurants, who owns Bryant Park Grill & Cafe and 19 other restaurants, said he will never open another restaurant in New York.

“There’s no reason to do business in New York,” Mr. Weinstein said. “I can do the same volume in Florida in the same square feet as I would have in New York, with my expenses being much less. The idea was that branding and locations were important, but the expense of being in this city has overtaken the marketing group that says you have to be there.”

Even as the city has contained the virus and slowly reopens, there are ominous signs that some national brands are starting to abandon New York. The city is home to many flagship stores, chains and high-profile restaurants that tolerated astronomical rents and other costs because of New York’s global cachet and the reliable onslaught of tourists and commuters.

But New York today looks nothing like it did just a few months ago.

https://www.nytimes.com/2020/08/11/nyregion/nyc-economy-chain-stores.html


Welcome to the new normal. The pandemic has devastated and reshaped the economy to an almost unimaginable degree. Urban planners have seen increasing density as the future of our cities, now that's open to debate.

[PSPS]

1. "increasing density as the future of our cities"

The pandemic hasn't really altered the idea of "increasing density as the future of our cities." Instead, it has altered the idea of having offices at all, going out all the time for shopping and entertainment, and free-for-all tourism. It's those items that are gone, at least for now, and businesses like these that depended on those, such as these restaurants and stores, have to abandon any business model that depends on them. You can still have increasing density. It's just that people won't be going out like they used to.

[bluewater]

2. The pandemic has dealt a blow to mass transit systems.

And unless no one ever leaves their apartment, people have to get around and increasing density depends on mass transit.

People simply feel unsafe riding crowded trains, subways and buses, and there are some indications that areas that depend mostly on cars have less covid transmission.

Due in part to this, flight to suburbs and smaller cities has already started, and I think this trend will continue for the foreseeable future.

[PSPS]

4. The trends in real estste certainly bear that out

Suburban sales have gone up but, surprisingly, they have in urban areas too. The reduction in the use of mass transit, though, is also due to other related issues too such as the abandonment of office spaces (i.e., at least 40% of jobs can be done from home) and, a side effect, the abandonment of businesses that cater to former office workers such as the restaurants and stores described in the OP, which are the largest employers of people who use mass transit.

An interesting note is that the reduction of mass transit use began well before the pandemic. Studies have shown that this is being caused by low-cost alternatives like Uber and Lyft. Most people who use these services say that, if it weren't for them, they would take a bus or other mass transit. This explains why cities who expand their mass transit service never see any reduction in traffic congestion.

[Loge23]

3. If you can make it there...

The Gap store was paying $234,000 a month!!
For a retailer, 10% (of gross sales) rent is usually the norm, perhaps more in NYC, so 15%?
That's about $2.5M in sales a month, every month!! That sounds unsustainable to me. But for a Gap, it's a Manhattan location for marketing as well as a practical ongoing enterprise. Tourists see a Gap store and then go back to Peoria and shop the local Gap, because it was cool, hip, and so NYC.
But things change. When I grew up in NYC we had very few national chain stores in Manhattan, even fewer in the boroughs. It wasn't until the 70's and 80's that national chains started to gain a noticeable foothold in NYC. The big tourism boom of the 90's, along with the increasingly ubiquitous (at that time) shopping malls onward really accelerated that process. Macy's, a NYC icon, got fat and started buying up regional department stores across the country - a relatively rare case of a NYC business spreading to the hinterlands. Even then, it wasn't difficult to see why a chain would maintain a Manhattan location when they could have the identical stores outside the city proper for half (or less) the rent.
It was for location, location, location and branding, branding, branding. Now, with the gross sales tanking everywhere, it's no longer sustainable.
When (or if) this plague ever abates, you'll see another retail gold rush in Manhattan, but one that may reap the benefits of the commercial real estate correction. Look for a massive transfer of commercial space to residential. There will be a reckoning.