What’s to Become of All this Vacant Retail Space?

 

The blocks around where I live between the Lower East Side and Soho are awash with empty storefronts and it’s not going to change anytime soon.

Soho has a 20% vacancy rate. And uptown isn’t much better based on what I saw this past Friday. The amount of empty storefronts up and down Madison Avenue as well as on 2nd and 3rd Avenues is shocking.

And then I saw this article about a Tribeca philanthropist, Andrea Woodner, who is turning over a floor in one of her buildings to artists. Studios are small, but only $1 a sq. ft, and they are being rented to hand-selected recent MFA grads under an initiative called the Hercules Art Studio Program.

For those developers and landlords whose buildings have been sitting vacant – sometimes for years – turning over the spaces to artists for a low, low rent might make sense. It’s a win-win for all concerned: artists and landlords.

  •  Artists bring the creative energy that attracts other creative endeavors and ultimately attracts more business to an area. Artists have, however, largely been priced out of NYC (even Brooklyn is too expensive).
  • Landlords and real estate developers have been largely out of luck when it comes to renting large spaces for flagship stores and getting top rents. Brick and mortar retail is dying. The most landlords can hope for is a string of  pop ups.
  • In the meantime, vacant storefronts attract vagrants and homeless encampments – not just in NYC, I’ve seen this happen in most of the cities I’ve traveled to this year.
  • And that generally leads to more criminal activity – we’ve had more shootings and muggings on the Lower East Side than I can recall since the 90’s. LA’s Downtown likewise has seen an uptick in crime.

So, let’s see if the Aby Rosen’s of the developer class, pick up on this idea.

In the meantime, there are alternative ideas being floated around the country for what can be done with all this empty space. Experts are predicting 50% of retail space nationwide will be vacant in the next couple of years.

Read on below.

TURNING RETAIL INTO APARTMENTS

Westfield is the latest mall developer to add non-retail uses to existing retail properties. They are building a 23-story residential tower onto one of their shopping centers in San Diego. More developers are expected to do the same over the next 5-10 years.

Department stores (especially those in historic buildings) are prime targets for conversion to residential.

Notable retail-to-residential projects include:

  •  MerloneGeier Partners redeveloping one wing of Laguna Hills Mall and creating Five Lagunas, which combines restaurants, shops, apartments and a one-acre park. Project is currently STALLED.
  • GGP building apartments on a parking field around Columbia Mall in Maryland.
  • Macerich adding office, multifamily and hotel uses to Tysons Corner in Virginia.

Lots of issues associated with rezoning of these projects. Many cities and counties are not supportive because it changes the tax base e.g. residential taxes are lower than corporate and at the same time require more services. It’s complicated!!

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