This weekend as I walked from 8th Street to Prince Street in Soho, I was appalled by what I saw. At least 50% of the storefronts were vacant. It is DISMAL to walk around NYC at the moment – nothing but scaffolding and homeless encampments in front of empty storefronts.
How did all the smart folk in Commercial Real Estate end up so unprepared and misinformed about what the future holds for them? Years after retail hit the skids, people like Abe Rosen (who I adore and respect) were still buying buildings and crowing about how the groundfloor space would make a perfect flagship for Hermes or whatever. I don’t get it. The writing was on the wall back in 2014 when I started this blog. Whether it’s Hudson Yards or Fifth Avenue or any other prime retail corridor around the country, the gig for retail and overpriced condos is up!
Commercial real estate in a meltdown AND out of touch
With empty storefronts as far as the eye can see, how long before the first commercial real estate giant goes belly up? Googling the subject brings up precious little but it’s going to happen I have no doubt.
Why? Because this is just the tip of the iceberg. for every 1% increase in online shopping, 8,000 stores close.
While there are thousands of articles blaming “greedy” landlords (and there are certainly some), I believe this reflects a much more systemic shift in how we shop and the changing value we place on “stuff.”
Ultimately, this will lead to commercial bankruptcies that will make the 2010 housing crisis look like a walk in the park.
I know real estate people take the long view and many of these projects were started decades ago but doing more of the same (when it’s not working) strikes me as ridiculous. Retail is not coming back even with rents dropping, e.g., rents along Upper Madison Avenue (57th to 77th Streets) dropped 11.7% from a year ago. No takers. Empty storefront upon empty storefront.
The building frenzy of high priced condos over the last decade, likewise, is not sustainable. It shows developers are out of touch with reality and out of step with the times. While the price for almost everything we buy these days has gone down, condo prices are skyrocketing. It’s totally out of wack.