The Landlord's Role in the Decline of Local Businesses in Lower Manhattan

“I never go into stores anymore,” a friend said on our way to dinner in our Lower Manhattan neighborhood. As we passed by another block of empty storefronts, I mentioned spotting a charming vintage clothing store in the West Village earlier that day. “Thanks,” she said. “I’ll see if they have a website.”

As the comic strip character Pogo once observed, “We have met the enemy and he is us.”

We long for small shops that bring to the neighborhood the cozy feel of a Hallmark movie, but sigh in resignation about our devotion to online shopping. Such cognitive dissonance is possible because each time a local business of any size closes after receiving an outrageous rent hike, we can point the finger away from ourselves and toward another culprit: The Landlord.

A nearby condop asked for an exorbitant rent increase from a salon that had been its tenant for almost 40 years. The condop boasts in its apartment listings that a high percentage of its maintenance fees are offset by ground-floor rents. Now the space sits empty. One developer purchased three blocks of local ground-floor space almost 20 years ago and has kept most of it empty ever since. The neighborhood’s independent pharmacy made it through the early days of the pandemic, when red tape made it difficult to quickly secure a PPE loan, because local residents, locked down and temporarily out of town alike, took up a massive collection — not a GoFundMe but an actual send-cash-to-the-store collection. The pharmacy was able to survive those dark days but couldn’t survive the rent increase that followed.

In my co-op, we are the landlord. The gallery that has long occupied our commercial space becomes a hot topic whenever its lease is up for renewal. At our next annual meeting, someone is bound to point out that a condo in a nearby neighborhood hit the landlord equivalent of the Powerball by landing a Polish museum, funded by the Polish government. This news is likely to energize shareholders who want to aim for a tenant more likely to buy expensive art than to sell it. Someone will suggest that someone (else) form a committee to investigate hooking a big fish like a cosmetic med spa, but not a luxury pet spa. Maybe a high-end real estate group or a successful architecture firm, but not a restaurant or coffee bar or gourmet shop. A surprising number of labor unions have their offices in the area. How hard could it be to poach one of them? Or one of the neighborhood’s many banks? Of course, we’ll want to steer clear of the growing number of cannabis dispensaries and motorized scooter shops.

In past meetings, the board has explained that our tenant is clean and reliable and, given its significance in the art world, adds immeasurably to our property values. Then, as if on cue, someone will ask, “Why doesn’t someone (else) form a committee to investigate selling the space?”

Let me count the ways.

At first glance, proceeds from such a sale could solve many of our short-term financial problems. We could create a reserve fund to pay for upcoming projects, allowing us to avoid a handful of future assessments, maybe even temporarily prevent a maintenance increase. But within a few years, that money would be spent, and we’d have lost control not only of the space but also of the opportunity to collect future rental income.

So far, we haven’t priced out our tenant or sold off our commercial space, instead managing to engage in the give-and-take necessary for any agreeable long-term relationship. Early in the pandemic, when business dropped almost to zero and our tenant considered terminating the lease, we negotiated a temporary but substantial rent decrease. At the time, shareholders were grateful to have any rental income at all and then were relieved, at least momentarily, when the lease was later renewed.

Another bright spot in the neighborhood is a formerly dilapidated building the previous owner had emptied of its locally run shops in anticipation of a glamorous rebranding. When the expense was more than anticipated, the building was sold. The latest owner repaired and restored the building’s crumbling facade and, by charging reasonable rents, has returned to the neighborhood a few small, individually owned businesses. Now when we leave our building, my fellow shareholders and I can admire the art in our tenant’s gallery and pause steps away to buy a warm cookie, get a beard trim or tuck into a freshly prepared sandwich.

Albert Einstein observed that “we cannot solve problems by using the same thinking we used when we created them.” I think Pogo would agree.