wolfstreet.com/2017/06/24/haunting-photos-of-shuttered-stores-on-madison-avenue/ Quote: In the 16 prime retail corridors in Manhattan, ground-floor vacancies surged from a year ago to 203 vacant stores, according to The Wall Street Journal, citing Cushman and Wakefield. Fifth Avenue between 42nd and 49th streets topped the list with a vacancy rate of 33%. On Fifth Avenue between 49th and 60th streets, where asking rent is $3,116 a square foot, the vacancy rate rose to 14.5%. A smallish 1,000-square-foot shop would have to pay $3.1 million a year in rent. That’s one heck of a big nut to have to jump over, with only 1,000 square feet of space.

There’s a simple fact: retail stores cannot make it when rents are too high, as margin and volume are already squeezed by online competitors. And landlords have started to read the memo. The Journal, citing CBRE Group, reported that overall asking rents fell 8.6% from the same period last year:

Asking rents for ground-floor spaces dropped in 11 of 16 prime Manhattan shopping corridors from a year ago, with some falling as much as 22% in stretches such as Spring St. and Broadway in the Flatiron District….

In SoHo, average asking rents on Broadway plunged by 16% in Q2 year-over-year to $667 a square foot, and on Spring Street by 22% to $828 a square foot. That’s still a lot of rent to pay. But cutting rents by these huge amounts is producing some results. The Journal:

How are your commercial units performing? Do you feel the storm clouds gathering? Have you lowered rents yet?

A lot of empty storefronts in the villages around my area.

The price per square foot for storefront rental is almost the same as for apartment, but apartments is not staying empty for so long.

I can guess small stores that was just reselling some goods cannot compete with bigger chains. Who will shop for a pair of sneakers in a corner store when you can go to Sport Authority? Bookstores and movie rental are vanished.

Repair service is not making any sense because it is cheaper to buy new stuff. I was trying to fix my shoes couple of year ago, but the price for soles was bigger than new shoes. My kid was fixing a silver chain and it cost about $20. Next time we will just go to Walmart and not waiting two weeks for repairs.

It look like food service and child entertaining is holding. Also, sport centers, like indoor cycling is replacing cloth stores.

For some mysterious to me reasons we have multiple hair salons in the area. Not sure if they making money by cutting and coloring hair or by doing some “alternative” activities.

I was thing what will be a good idea for these ground floor units, but cannot figure out yet.

I am seeing signs of a RE bubble. The millennials I work with -- the ones who were never supposed to want to buy -- all are house hungry and buying houses at inflated prices. They need to pull down extra shifts to make both the mortgage and their student loan payments. They are on the edge. That is a bad way to live.

I live near a resort area. Everyone is doing VRBO. One nurse I work with has 4 SFHs in Coeur d'Alene doing vacation rentals. Renting out an extra bedroom on AirBNB is one thing -- carrying 4 mortgages for a seasonal rental business is another. I will be interested to see how she does long term when she is only getting income for 4 months out of the year. This is actually good for our business, as it is displacing Coeur d'Alene renters to Post Falls (once named the most boring city in the inland Northwest) where we have our apartments.

DH and I are always looking at strip malls that we pass by, looking for ideas about small businesses that could be successfully transplanted into our small town and bring a few jobs and add to our local economic diversification.

No luck finding anything worth pursuing, but we have noticed that pretty much every strip mall we pass has at least one salon. It might be nails-and-hair, or it might be nails-and-tan, or it might just be straight nails, but there's always a salon.

Another lifetime ago, around 2004, some friends of ours were looking at forming a RE investment group amongst ourselves in the metropolitan area we lived in at the time. We talked about it, but it never got off the ground. One big reason was because we couldn't agree on what kind of real estate to focus on. Some of us were all about the benefits of residential, but one, who was a second-gen family business owner, made a good argument for getting into commercial space. His biz had been in the same location since the 50's, so the idea of a tenant staying in place for 50 years was super-attractive. I pointed out five or six commercial spaces, however, that I passed by every day on the way to work, that had remained vacant for as long as we had lived in the city-- and every person in the room could think of five or six perpetual vacancies *they* passed by daily.

Most of the strip malls in my town consists of:

1) Workout place (martial arts, kick boxing, etc.)

2) Payday lender / title pawn

3) A Chinese restaurant

4) A gourmet coffee joint (Starbucks, etc.)

5) Either a gourmet donut store with $3 donuts or a frozen yogurt place where you pay 3x the going rate per ounce

6) A hodge-podge of "other" businesses, many of which are service oriented. Hardly any retail outlets. Occasionally something like a mechanic shop.

7) At least one other restaurant.

My town loves to eat out. I think we have more restaurants per capital than anywhere in Missouri. You come to swim or sink in the food service industry. Tons of great places entering and going out of business every 1-2 years.

Rents here are still relatively low the to rest of the country, but so are incomes. That said, the south side of town and far north side have TONS of high-$$$ homes. 3000-4000 sq ft house neighborhoods popping up all over the place and have been for the past 5 years. There's a lot of money here, but there's also a ton of debt fueling it all. Doctors, lawyers, business owners, people who are tired of the "big" big city and like the down home style of the Ozarks. People with $100K a year income can afford a McMansion here. The taxes and utilities are cheap. Hubby can have his golf course home and wife can buy her $200/pair designer jeans.

In short, I think our local economy is propped up by cheap residential real estate which gives folks of means plenty of room to spend a lot of disposable income. We also have a well-diversified economy of private business, manufacturing, retail warehousing/distribution centers, transportation (I-44 runs thru north town) and we are the county seat. It's easy to be a two income family making 6 figures and live in a nice house with payments under $1000/month.

Plunge to $667.00/sf! Worlds apart from my market. Holding steady at $1.00 - 1.79/sf here, although commercial rents finally seem to be going up. Residential has been on the rise for a couple of years.

I have been getting more calls than usual on my vacancies. The city demographic has changed. We still have the usual large retailers, it's the small retailers that have changed.

Most small retail space is occupied by the "instant gratification" businesses:

Booze/cigs

Fast Food/Coffee

Nails/Hair

Check cashing

Tattoos

restaurants

Head/vape shop(soon to include pot)

California...

New York or any major city for that matter is its own market.

What your seeing is a bunch of things:

1. Landlords are jacking the rent to take advantage of the market. Sometimes to much, this will adjust.

2. The internet has been killing retail space for almost two decades now, this won't change anytime soon. Commercial is and has been over built for a long time now.

Lastly my generation, the "millennials" who are now starting to be felt economically love cities and will continue to move to metropolitan areas for the foreseeable future. So meh right now their are some vacancies but IMHO any real estate on a metropolitan coast is going to have a good 50 year run.

I have couple of small mixed use buildings and it is tough to get a quality tenant into these commercial spaces. I get someone wanting to start a consignment store.