Retail Chains Hit The Exit Button On Manhattan Leases, Say It’s Unsustainable
Some national retail and restaurant chains are bailing out of New York City, closing branches that may once have been among their top performers, but are now struggling more than in other parts of the country.
Once the hardest-hit areas of the pandemic, New York has drastically reduced its number of new Covid-19 cases through lockdowns, social-distancing and travel restrictions.
Five months into the pandemic, economic damage in New York has been far worse than elsewhere in the country in many cases, New York Times reported.
The virus may be under control but businesses are suffering as with so few people going to work, almost no visitors and many residents reluctant to go out for fear of their health.
Once-packed city sidewalks are almost empty, former office workers are working from home and many wealthy residents have left for second homes.
Before the pandemic, Bryant Park Grill & Cafe in Midtown Manhattan was one of the country’s top-grossing restaurants, the star in Ark Restaurants’ portfolio of 20 U.S. restaurants. Now the tourists are gone, the office towers are largely empty and the dining room is closed. Dinner is cooked and served on the patio and the restaurant has seen an 85 percent drop in revenue, bringing in about $12,000 a day, according to CEO Michael Weinstein.
In Manhattan, national chains including Le Pain Quotidien, Subway, Kate Spade and J.C. Penney have closed branches for good. Many other large brands including the Gap and Victoria’s Secret haven’t reopened in Manhattan while reopening in other states.
The city has contained the virus but “there are ominous signs that some national brands are starting to abandon New York,” New York Times reported. “The city is home to many flagship stores, chains and high-profile restaurants that tolerated astronomical rents and other costs because of New York’s global cachet and the reliable onslaught of tourists and commuters.”
Shake Shack, which originated in New York City, reported a 40 percent revenue decline in the second quarter. Its stores in big cities like New York “were most impacted by the Covid-19 outbreak,” it reported. Chipotle also reported that its New York stores are performing worse than others, investment analysts said.
“Anyone in the food and dining business is really suffering right now,” said Vin McCann, a restaurant consultant with Heyer Performance in Lower Manhattan. “I think that’s true in all the boroughs.”
New York travel restrictions are among the most extensive, affecting more travelers than other states. If you’re going to New York from most states, there’s a good chance you have to quarantine for 14 days. You must also complete a mandatory traveler health form or face a possible $2,000 fine.
New York City landlords have started filing lawsuits against commercial tenants for not paying rent, accusing some national brands of trying to take advantage of the crisis, New York Times reported.
“More and more retail real estate space is going to be taken up by non-luxury,” said Naveen Jaggi, the president of commercial real estate services firm JLL’s Retail Advisory team, in a CNBC interview. “Take Fifth Avenue. You see a Vans, a Five Below and a Timberland. Those kinds of brands are the ones taking space. That’s all you need to know about the direction of Fifth Avenue.”
Veggie Grill, a California-based chain with 35 restaurants, opened its first New York branch in the Flatiron district in December with plans to open another three locations in the city. Sales are down 80 percent since before the pandemic, said Jay Gentile, the company’s chief operating officer.
By comparison, West Coast Veggie Grill locations have been doing as much business lately as they did a year ago, Gentile said.
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Three months after opening, Gentile had to lay off all 70 of New York employees. In May, the company hired back 24 workers expecting business to pick up. Now, the staff is down to 16 with two full-timers.
“We have two hours at lunch and 2½ hours at dinner to make our money,” Gentile told New York Times. “We’re still paying very high rent. It’s unsustainable.”
Still, Gentile said he’s determined to keep the doors open. “If we close New York down,’’ he said, “then we would have to close it for good.’’