The problem with a cliff is that once you accidentally fall off one, there is not much to grab onto. The current condition of New York City commercial real estate is probably looking at a cliff scenario. The pedestrian and retail traffic is just not coming back to the city as anticipated. COVID-19 took the city hostage and all of its retail vendors.
What made the current pandemic so destructive is that the stores that depended primarily upon foot traffic found that their customers were able to purchase items they had for sale through other platforms, those that had already established online selling platforms.
In an extreme case, the Swiss retailer Akris has purchased 3 Madison Avenue properties at prices, which according to a Wall Street Journal article, were 80% below 2014 peak prices.
According to a Cushman Wakefield report, New York City rents on Madison Avenue have fallen 17% in the third-quarter 2020.
Commercial real estate in New York City is not the only market sector that will be taking financial hits as a result of the pandemic. New York City municipal revenue coffers will significantly be hurt.
Without the ongoing revenue stream coming into the city, the city will be hamstrung to offer any incentives for businesses to return back to the Big Apple.
In addition, it is common knowledge that New York City rents were already incredibly inflated even for a good economy. Without a robust tourist market coming in for the shows and the shops for the holiday season, this pandemic appears to be placing its foot on the neck of the city’s economic pipeline.
Even in the center of New York City’s Theater District, the Times Square vacancy rate in Q3 stood at 29% of space available. Probably not since the 1930s had such a void plagued the city.
With all the retail fallout coming, which included the 200-year-old Lord & Taylor, eyes are set on Brooks Brothers, JCPenney and J.Crew to see if they will be able to weather this storm.
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