
Mapping Manhattan's shuttered storefronts - danso
http://www.vacantnewyork.com/
======
sotojuan
Off-topic question but I'm curious about this: In my five years in NYC I've
seen many stores closing, some that were great but just couldn't afford rent.
This article shows a lot of storefronts that closed and haven't been rented.

Why then, are there so many bad, generic souvenir shops and massage parlors? I
used to work in midtown and Chelsea, and there were at least two or three of
these in every block. In Chinatown, there's a block that is _just_ souvenir
shops. Never been to a massage parlor, but all the souvenir shops looked the
same and sold the same (overpriced) stuff.

What's weirder is that most of them (the souvenir shops) are pretty empty most
of the time.

I understand the relationship between massage places and fronts for
prostitution and that money laundering exists but I just can't believe all of
these are able to exist for years and years without either being busted or
going out of business, yet many other businesses come and go.

~~~
cylinder
With Chinese businesses like that usually the owner of the building is Chinese
and often they operate the business or know the operator. They don't sell
their properties much and rent to people they know. That's why Chinatown is
still pretty much the same amidst all the surrounding gentrification.

~~~
sotojuan
As someone who lives in Sunset Park (Brooklyn Chinatown) I am well aware and
sorta happy gentrification will never happen here—realtors in the area willing
to rent to non-Chinese still keep prices low :-)

~~~
splintercell
I never understood this, why do people hate gentrification?

~~~
sotojuan
I don't dislike it. I like cleaner streets, more cafés, more stores that take
cards, amenities, etc.

I do dislike my rent doubling in price. In NYC, both go hand in hand. For now
since I just finished college, I'll take my super low rent. There's nothing
"wrong" with where I live anyway.

For a non-selfish response, Sunset Park is one of the few neighborhoods where
most people people are working class. Indeed, most of the cooks, dishwashers,
etc in Manhattan live here, sometimes many in one apartment (to be able to
afford it). I can't imagine where they'd go if the area gentrified.

------
IIAOPSW
I didn't follow the "chain reaction" argument. Why can't a landlord drop a
price on an under-performing asset without it rippling through to the other
assets? And even if it did happen, their current tenants are locked into
contracts. only their vacant lots would go down. Surely if the concern is
devaluing their other locations, but those locations are also empty, then that
"value" only existed on paper in the first place.

Also why not just subdivide the vacant space into several stores at the same
price per sq ft?

~~~
tacostakohashi
If a landlord owns lots of retail properties in an area, then the constraint
quickly becomes the finite number of retail dollars being spent in that area
on a given retail category, especially given that retail rents are more or
less a fraction on the takings of the retailer.

Lets say you own 20 stores in a concentrated area, with some restaurants, some
newsagents, some hairdressers making up 15 tenants, and a 5 of them are empty.
If you rent them out to a competitor to any of your existing tenants, then
they're just dividing the existing business among more shops, so now you have
20 leases to administer, properties to maintain, etc. Better to just leave the
5 empty, and the business goes to the existing tenants. Those tenants are now
more profitable due to better economies of scale (and less competition) than
they would otherwise be, so you can raise their rent. The 15 tenants and the
landlord win, customers and residents of that area lose.

The only solution is to penalize concentrated ownership somehow (which has its
own problems, presumably reducing values), or find ways to attract _new
customers_ for new retail categories into the area. For example,
[http://renewnewcastle.org/property-
owners/](http://renewnewcastle.org/property-owners/) is a scheme whereby
property owners let tenants use empty premises for free if they're not
competing with existing businesses in the area.

~~~
ee8aq3g5c6
Hmm, it seems this would only be true of all residents within walking distance
of the empty buildings already have all of their desires catered to by a
storefront you own. I am really skeptical that this could be true in a place
like Manhattan where the supply of commercial space is highly constrained.

This seems more like a price stickiness issue.

~~~
tacostakohashi
Your model seems to involve people with no desire to save money, willing to
spend every last cent if only the right shop would open on their block.

In the real world, people have a certain, finite amount of disposable income,
which is constrained by their other expenses as well as their desire to save
for the future (retirement, etc).

~~~
ee8aq3g5c6
I edited my post to remove a clause like "already have all of their desires
catered to [or they have no money left]". I want to make that clear so readers
of you comment have full context.

My response would be that unless you have, say, a restaurant for every cuisine
in your portfolio, you have an opportunity to get a bigger share of restaurant
spending by opening a restaurant of a different cuisine (which will compete
with restaurants in buildings other landlords own).

And this will probably have an ultimate effect of lowering prices and
increasing consumption. But that doesn't have to be true for it to make sense
to open a competitive restaurant.

~~~
tacostakohashi
Hey thanks for that note, I look like less of an idiot now :)

The thing is, neither the landlord nor the restaurant tenants care about
market share (although it's true that it could be increased by opening a new
restaurant of a novel cuisine). As for lowering prices, that would be
something they're actively trying to avoid. As much as they'd probably like to
increase consumption, the number of residents in the area is a constant, and
they eat at most one dinner per day.

Remember, they're trying to maximize _profit_ , not market share, meals
served, resident happiness, etc. It's like asking why there are empty seats in
business class on a plane, when the airline could lower the fare and attract
more customers, market share, etc? It's true, they could, but they're not
_trying_ to maximize the number of passengers (with the associated extra
weight, fuel costs, etc). They're trying to maximize profit, and if high fares
for a few people and a bunch of empty seats do that better than lower fares,
full seats, and a higher fuel bill, then that's great for them.

The empty stores are a documented phenomenon, the only question is _why_ it's
like that. If you don't like my theory, another explanation would be
interesting to hear... speculating that the situation shouldn't exist, less
so.

~~~
ee8aq3g5c6
I feel that your argument only makes sense if one player controls a majority
of the market, so that the majority of sales stolen by the new restaurant come
from the same owner's existing restaurants. It's not enough to just own a
handful of nearby buildings, you actually have to dominate several blocks. And
decide to keep a bunch of that valuable real estate empty instead of
converting it to condos.

Here are some possible explanations:

1) Deliberate price-fixing behavior from a majority cartel of owners. A lot of
these buildings are owned by publicly-traded REITs. This would be a pretty big
conspiracy.

2) Price stickiness. Prices have not caught up to reduced demand. Accepting a
lower rent means losing. A version of this is the reason given in the article.

------
jrockway
I like the idea of a vacancy tax.

Isn't this a zoning thing though? I assume I can't rent a storefront and live
there, even though it probably has running water and protects one from the
cold, rain, and small meteors.

~~~
ec109685
I think it would be prohibitively expensive too.

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EGreg
Where are the anarcho capitalists on HN? What do you say about this alleged
market failure?

~~~
tlb
It's not clear that there's a failure. The overall retail vacancy rate in the
US is around 11% [0]. The article didn't give an overall statistic, but it's
not clear the average NYC high-end vacancy rate is any higher.

A 0% vacancy rate is impossible: nobody could move. To have liquidity and
stabilize economic cycles, you want to average somewhere around 10% vacancy.
So the system is working fine.

[0] [http://www.statista.com/statistics/194102/us-retail-
vacancy-...](http://www.statista.com/statistics/194102/us-retail-vacancy-rate-
forecasts-from-2010/)

~~~
tacostakohashi
Or, to the extent there is a market failure (indeed, this is unclear) it's
just because the landlords don't pay the cost of the externalities - reduced
neighborhood amenity, low competition / higher prices.

These fall on the residents, and if they felt strongly enough about it they
could stop it from being an externality by instituting a vacancy tax, buying
the properties and renting then to artist at a loss, whatever.

------
dandare
So, why are the vacancies bad and why not let the free market to deal with it?

~~~
frozenport
They are bad because the neighborhood is empty. The free-market, in many
locations, is inflating property prices beyond their value as
housing/offices/storefronts, because they are being used to absorb capital
"value". Imagine if everybody decided to use food as a store of financial
value. You're going to learn that the only reason your bread cost $50 is
because some oversea investor will pay for it. He won't sell it you, because
he knows in a few months the prices will go up. It would suck if you wanted to
eat something.

