By Adelaide Polsinelli, Principal and Senior Managing Director at Eastern Consolidated
Retail rents in New York City have continued to increase as Americans trend toward urban living and the U.S. maintains the world’s most dominant and stable economy.
And New York appeals to retailers in two powerful ways: it offers the ultimate “cool factor” among U.S. cities, as well as a diverse and dynamic economy.
Of course, retailers are chasing the dream, too, and are willing to pay rising rents for access to the city’s residents and visitors.
However, new, cutting-edge retailers are chasing out some of the traditional, long-term businesses that have served the city for decades.
Plus, while real estate is a business, stores are personal. The wine shop on the corner is “my wine shop,” and the dry cleaner next door is “my dry cleaner.”
There will always be someone opposed to the closing of “his shoe repair shop” or “her bookstore.”
But if someone else’s organic grocery store can make more money than the neighborhood bodega, is it really a bad thing?
So, you can call it gentrification, reincarnation or a crime. But perhaps, it’s simply survival of the fittest.
As time has passed, some businesses have essentially outlived their usefulness with advances in technology, changing consumer preferences, and changes in demand for their products and services.
When is the last time you went into a store to rent a movie? Took your typewriter in for repairs? Sat down with a travel agent?
Instead, you’ve probably watched a movie on Netflix on Friday, traded in your flip phone for a new iPhone 6, and booked flight tickets on Expedia.
The needs of the market have changed, and so too must retailers.
With purchasing power at our fingertips, some brick-and-mortar businesses can’t keep up with the convenience and instant gratification of online service.
Landlords are often portrayed as the driver behind the shuttering of mom-and-pops and the rising retail rents throughout the city. But the fact is that landlords are, for the most part, also mom-and-pop shops themselves, like other small business.
They invest in buildings to make money, and they make returns on those investments via rental revenue or by selling a property whose value has risen with the market.
And therein lays the key. Landlords don’t determine rents, the market does.
Retail rents in the West Village, for example, have risen dramatically thanks to the High Line’s success and new development all the way up to Hudson Yards and Manhattan West.
Any property owner who doesn’t raise rents accordingly may not be able to keep up with the ever-rising real estate taxes and won’t be in business for long.
There is another consideration that is often left out of the conversation about the struggle for mom-and-pop businesses to survive: many of the larger chains themselves started out as small businesses and later grew into successful chains that are still thriving today.
Whole Foods Market started from humble beginnings in 1978 as Safer Way Natural Foods in Texas.
Soon after, founders John Mackey and Rene Lawson Hardy partnered with Clarksville Natural Grocery to create the first Whole Foods Market in 1980.
The chain now maintains more than 400 stores throughout the country.
One of the largest mom-and-pop successes is Walmart, which founder Sam Walton originated in 1950 with Walton’s Five and Dime in Arkansas before opening the first Walmart Discount City store in 1962.
The retail corporation – now the world’s largest firm by revenue – today maintains more than 11,400 stores worldwide.
A retail company’s viability, including its bricks-and-mortar presence, begins in its business model and the demand for its goods and services.
Fortunately, we live in one of the greatest countries in the world and have the freedom to own property, start a business or close a business.
Many business owners may buy a property or rent a space to house their business in it. But one day, the property and storefront space could be worth more than the business.
So it makes sense to always remember: When one door closes, another opens.