The death and life of mom-and-pops

In September, an article about a Silicon Valley startup called Bodega incited outrage in the world of social media. The concept was that this company would put little automated stores, resembling glass-fronted IKEA bookshelves, in apartment buildings to eliminate stressful trips to the grocery store. “The vision here is much bigger than the box itself,” Bodega co-founder Paul McDonald, formerly of Google, boasted to a Fast Company reporter. “Eventually, centralized shopping locations won’t be necessary, because there will be 100,000 Bodegas spread out, with one always 100 feet away from you.”

McDonald’s pitch is pretty much what tech startup guys have been saying since day one: We are going to replace every aspect of your daily routine with a widget. The corner store has been on Silicon Valley’s hit list since the mid-1990s, although the seemingly unstoppable proliferation of chain drug stores with increasingly well-stocked food aisles has probably done more damage to mom-and-pops than any app. Nonetheless, the idea of a company named Bodega replacing brick-and-mortar corner stores was just too smarmily Orwellian. The boxes themselves looked like an act of vandalism waiting to happen. And so the hate-Tweeting began.

But there was also something eerie about the timing. This moment is an unusually fraught one in the retail industry. It now appears that even the relentless waves of CVS and Walgreens/Duane Reade stores might finally be contained by the seductive power of Amazon. 2017 is also the year that big name merchants like Toys ‘R’ Us and Radio Shack have filed for bankruptcy, and historic purveyors of the ordinary, like J.C. Penney and Sears, have shuttered hundreds of stores.

Much of the slaughter is taking place out of sight in suburban malls, but the vacancy rates in the most desirable New York neighborhoods usually crowded with designer showplaces are also way up. As retail leasing expert Billy Macklowe of the William Macklowe Company told The Real Deal, “I think retail is fucked, plain and simple.” He suggested taking a walk along Madison Avenue or through Soho. “If you do that, just on a visual basis, you will get to a radical vacancy rate the major brokerages aren’t putting out there,” he said.

What if this is the perfect storm? What if this is the exact right moment not to fill apartment lobbies with ersatz bodegas, but to finally halt the seemingly unstoppable onslaught of boring, generic stores?

The numbers suggest that it might be. The most recent Marketbeat analysis from real estate services firm Cushman & Wakefield puts vacancy rates at 20 to 30 percent in Manhattan’s choicest shopping districts. The vacancy rates only seem to diminish where landlords have begun to reduce the rents.

Anecdotally speaking, there also appears to be a groundswell of support for the classic mom-and-pop retailer. That story is being told most emphatically by a blogger named Jeremiah Moss, a pen name for psychotherapist Griffin Hansbury, whose book, Vanishing New York: How a Great City Lost its Soul, was published in July. The book is a distillation of a blog that Moss has been writing for a decade, recording the demise of beloved neighborhood businesses, most of them run into the ground by astronomical rent increases.

The rent hikes were sometimes driven by greed and other times by sheer absurdity. Moss recalls the Sex and the City episode in which Carrie Bradshaw is shown eating a cupcake from the Magnolia Bakery on a tranquil corner of Bleecker Street. Soon after it aired, hordes of fashionistas began to line up at Magnolia for cupcakes, attracting the attention of style merchants, most notably design Marc Jacobs, to a formerly humble stretch of bookshops and cheesemongers. Suddenly, a store on the western stretches of Bleecker could fetch $25,000/month.

Now, the Marc Jacobs shops of Bleecker—once running to a half dozen storefronts—are as gone as Nusraty Afghan Imports and the Biography Bookshop.

“It’s basically tumbleweeds on Bleecker Street,” New York State Senator Brad Hoylman told me. Hoylman made headlines in May with a study called “Bleaker on Bleecker: A Snapshot of High Rent Blight in Greenwich Village and Chelsea.“ The title says it all: Overweening landlords are sucking the life out of otherwise vibrant neighborhoods. The study found that 26 of 141 storefronts on Bleecker were empty, abruptly vacated by the high-rent merchants who’d driven the earlier, more modest tenants out. “It’s been a two-step process,” notes Hoylman, “insult to injury.”

Similarly, Manhattan Borough President Gale Brewer sent a team of interns and volunteers to walk the length of Broadway in Manhattan, some 13 miles. She released a report in June showing that 188 storefronts on Manhattan’s central artery were vacant. Brewer concluded that the “normal ‘invisible hand’ of capitalism—old businesses closing and new ones quickly replacing them”—was broken.

Again, none of this is exactly news. To be a New Yorker is to be deeply and perpetually aggrieved over favorite spots that are no more. All of us have a list of treasured businesses that were driven out by market forces. For example, I still pine for Florent, the convivial 24-hour French diner that, when it opened in 1985, began the influx of nightlife into the wilds of the Meatpacking District. Florent closed in 2008, driven out by a landlord who felt compelled to replace the beloved hangout with her own restaurant; it didn’t last long. Now the storefront holds another outlet of J. Crew-owned Madewell.

New Yorkers have been trying to fight back against the invasion of chain stores and other invasive retailers since at least 1986, when a bill called the Small Business Jobs Survival Act (SBJSA) was introduced to the New York City Council by the Upper West Side’s former councilwoman, Ruth Messinger. Her bill would mandate a 10-year minimum lease for retailers with the right to renew for another 10, and set rules for landlord/tenant negotiations. However, the bill languished and has never been given a vote—presumably because the powerful real estate industry has long been opposed.

Some council members, like Park Slope’s Brad Lander, who has assembled a map of beloved small businesses in his district, claim the bill would be unconstitutional because New York City rent rules are made in Albany. While Lander is a hero on many issues, he passes the buck on this one. According to his website: “If Albany can construct a legally-sound, thoughtfully targeted approach to providing some protections for independently-owned small businesses I would be eager to support and implement it here.”

Currently, Manhattan Borough President Brewer is trying to drum up interest in a more modest approach, a bill that would offer commercial tenants an automatic one-year extension on expiring leases and mandate negotiations between landlord and tenant. She says that in a recent conversation with Mayor Bill de Blasio, he has “expressed interest.”

At press time, the mayor's office had not responded to requests for comment. However, according to a New York Post account of a town hall meeting in Brooklyn Heights, the mayor, while urging attendees to spend their money at locally owned businesses, steered clear of making any commitment to act. "We don't have tools that are going to solve the whole problem,” he said, “because some of this is about consumer behavior."

“I have found it very difficult to get people to rally behind small businesses and to actually engage as activists and as citizens in pushing City Hall to do something,” Jeremiah Moss tells me. “I think it’s because we as a culture have been taught that the free market has to be free and that we can’t interfere with it.”

Nonetheless, he regards the long dormant SBJSA as step in the right direction, though not nearly enough. “I would love to see commercial rent control return. Most New Yorkers have no idea that New York City had commercial rent control.” (It existed from 1945 until 1963, enacted by the state legislature at the urging of Mayor Fiorello LaGuardia.)

Moss also advocates “cultural landmarking.” He explains, “A place like CBGB, for instance, should have been landmarked, right? Protected from getting evicted.” (It’s worth noting that although the club was shuttered because of a long-term rent dispute, CBGB’s landlord was an organization that housed the homeless, not an avaricious developer.)

The cultural landmarking approach has been embraced by San Francisco which, since 2015, has maintained a registry of “legacy” businesses. The rules, according to the program’s website: “The registry is open to businesses and nonprofits that are 30 years or older, have been nominated by a member of the Board of Supervisors or Mayor, and in a hearing before the Small Business Commission, prove that they have made a significant impact on the history or culture of their neighborhood.” Being listed in Registry makes both businesses and their landlords eligible for annual cash grants. The roster includes former beatnik hangouts like North Beach’s Caffe Trieste, the irreplaceable City Lights Bookstore, and the locally owned Good Vibrations chain of sex toy stores.

This strategy of treating beloved shops, bars, and restaurants as historic landmarks is gaining traction worldwide. Barcelona and Lisbon have both implemented similar programs to protect businesses deemed essential to the cities’ character against an onslaught of tourist-oriented shops. Lisbon’s list includes several of the tiny walk-up bars counters that specialize in Ginjinha, a cherry-flavored liqueur customarily consumed on the sidewalk. There are also more conventional bars on the list, along with haberdasheries, glove shops, and a candle emporium that dates to 1789. All are gorgeously authentic and sell unique, locally made products.

Admittedly, there is something immensely appealing about the idea of offering safe haven to the survivors of the Siege of Marc Jacobs, and declaring John’s Pizzeria, Faicco’s Pork Store, and the ever-expanding Murray’s Cheese Shop as historic monuments. On the other hand, the vitality of cities is a product of change. In theory, at least, there’s a limit to how much you want to restrict the transformation of the commercial landscape.

Moss describes himself as “bitterly nostalgic,” and nostalgia is inarguably one facet of almost every New Yorker’s psyche. But most of us are also suckers for the hot and the new. The problem is that certain kinds of newness make the city decidedly less hot. And while cultural landmarking can preserve the old, it’s useless at preventing the deadly dull streetscapes that are the inevitable result of new construction.

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So how do we stop the influx of big banks and chain drugstores that clog the ground-floor square footage of every new building? The closest anyone has come to answering this question may be Manhattan Borough President Brewer.

Five years ago, when she was still a city council member for Manhattan’s Upper West Side, Brewer convinced the Bloomberg administration’s planners to implement new rules in her district. Banks would be limited to storefronts no more than 25 feet in width on Broadway and Columbus and Amsterdam Avenues, and new stores could not be wider than 40 feet on the avenues. A new bank can’t be within 500 feet of an existing bank. There is one major exception to the rules: “If you’re a new grocery store, which we desperately need, they can be any width,” explains Brewer.

It’s a clever, nuanced approach. Brewer says that city planning has not yet evaluated the effectiveness of these rules, but that other council districts are considering implementing similar restrictions. “It’s just one tool in the toolbox,” Brewer tells me while acknowledging, “there aren’t a lot of tools in the toolbox, to be honest with you.”

Maybe it would be easier to fashion tools if we understood the problem better. I’ve been writing about this city for a long time, but I never knew the real reason there were so many damned drugstores until I interviewed architect Vishaan Chakrabarti a few years ago. At the time, he was a partner at SHoP, but Chakrabarti has also served as director of the real estate development masters program at Columbia, a director of the Manhattan office of the Department of City Planning, and president of the private development corporation formed to build Moynihan Station.

When I met him in 2013, he was promoting the master plan that SHoP had drawn up for the Domino site in Williamsburg. His client, Jed Walentas of Two Trees Management, was intending to fill the development’s ground floor spaces with independent retailers, much as he and his father had done in DUMBO. Chakrabarti told me that because Two Trees was self-financing the Domino project, Walentas didn’t have to play by the rules that pretty much mandated banks and drugstores at every building’s base.

“The rules?” I asked.

“The reason for that is the bankers,” Chakrabarti told me. “Those chain stores are credit tenants. Now, especially in a tougher construction climate, bankers insist on credit tenants as the retail. Duane Reade or a Chase Manhattan bank are always going to be more credit-worthy.”

I was shocked, but not surprised. The root cause of the inexorable march of corporate retailers is that banks that hold the paper on the developers. Banks, naturally, regard banks as credit-worthy tenants. Chakrabarti had revealed something that should have been obvious, a critical juncture in the leasing process, a node where city government could intervene, if it so desired.

So I recently sought out Chakrabarti, who now has his own urban design firm, the Practice for Architecture and Urbanism (PAU), for a follow-up conversation about ground-floor retail.

“What’s interesting is so much has changed since we had that conversation four years ago,” says Chakrabarti. “There is, to me, a very sweet irony in the fact that all these chain stores that basically decimated local retail, decimated main streets across America, they are now the stores that are the most on the ropes because of Amazon.”

“So I actually think this is the moment where that finer-grain retail could make a big comeback,” he continues, “because what you can’t get on Amazon is unique experience, right? And from talking to people I know in the real estate industry, there is going to be a big price correction in ground-floor retail. It’s already happening.”

Okay, so maybe what Chakrabarti is saying is that we don’t have to do anything. That the whole house of cards is about to tumble, and Staples stores will magically give way to independent stationers and Starbucks will be replaced by 24-hour Meatpacking District diners selling juicy turkey sandwiches.

However, if you listen to the retail leasing executives—the people in charge of finding tenants for storefronts—it becomes obvious that even if Billy Macklowe’s prognosis is correct, and even if retail rents are actually dropping in some parts of the city, the mom-and-pop movement still doesn’t stand a chance. At a recent member’s luncheon held by the Real Estate Board of New York (REBNY), panelists held forth on the future of retail. The upshot was that, if we’re patient, internet businesses that feel the need for a brick-and-mortar presence—see Warby Parker—will fill up those empty spaces.

The hottest category, according to the REBNY speakers, is food: casual, experiential, fun food. One panelist, Michael Goldban, a senior vice president who heads retail leasing for Brookfield Properties, mentioned that one new Brookfield development, Manhattan West (just east of Hudson Yards), will feature a Whole Foods that will be “a temple of food.” It seems entirely possible that sometime soon, we’ll regard Whole Foods with the disdain we currently have for chain drug stores.

Goldman also mentioned that he’d recently toured Brooklyn. Brookfield is currently developing Greenpoint Landing, a cluster of 11 waterfront towers in what was once an isolated heavily Polish community full of shops selling kielbasa and pierogi. In recent years, Greenpoint has morphed into a hipster hotspot—Girls is to Franklin Street as Sex and the City is to Bleecker—and soon it will have what Brookfield terms “a full complement of retail amenities.” Or as Goldban frames it, “a cohesive experience.” The migration of Brookfield and its cohesive experiences into Greenpoint doesn’t bode well for the vitality of independent retail elsewhere in Brooklyn. No place is truly safe.

But given the tumult in the retail industry, it might be the perfect time to try out an idea. I ask Chakrabarti: Is there a mechanism, something the city could do to protect long-time, beloved businesses in a way that won’t screw things up in some other way?

“How about having them pay less taxes?” he suggests. “As a progressive, I’m always astonished by the fact that we don’t use some of the tools that the opposite side of the aisle uses so well. So rather than trying to freeze things in time, how about making that small businessperson’s economics easier?”

Seems reasonable. But I’ve entertained another idea since our first conversation. I’ve always thought that there should be a carrot solution to bland look-alike streetscapes, rather than a stick solution—an incentive rather than a regulation.

It used to be that developers were allowed to build taller if they installed public plazas at street level, in what was called a “plaza bonus.” Lately, the city is handing out bonuses for the inclusion of affordable housing. This is called inclusionary zoning. But what if we could somehow counter the financiers’ demand for credit tenants by introducing a bonus? You could build more square footage—taller or denser—if your ground-floor tenants are bona fide local merchants. Call it an indie bonus or inclusionary retail.

“Yes, that’s a great idea,” Chakrabarti replies. “You could sell that policy proposal all day long.” He points that his firm is designing a project in Philadelphia where “ground-floor retail doesn’t count as FAR,” an acronym for floor-area-ratio. FAR is a zoning formula that dictates how tall you can build relative to the size of your lot. (Zoning allows more FAR in Midtown Manhattan than it does in, say, the West Village.)

“Look, there’s only two legal ways to create money in the United States,” Chakrabarti argues, “the Federal Reserve and an upzoning. So free FAR is worth its weight in gold.”

I run the idea by Moss and get a far less enthusiastic reception: “I sort of have a reaction to that which is, again, it’s part of our current post-1970s, neo-liberalist, free market ethos,” he explains. “The developers have all the power, they have all the control, so we’ll give them more goodies if they just let us have a little something.”

I tend to agree with Moss that we can’t depend on the private sector to supply all the things that are beneficial to society. For example, I think it’s a mistake to rely solely on private developers to build affordable housing or vital infrastructure. But when we are talking about saving small retailers and increasing their numbers, we are talking about businesses, and very specifically talking about the private sector.

I don’t see it as a matter of handing out goodies. Instead, I think we need to give big capitalists the incentive to take better care of little capitalists. Our mayor is forever saying that he’s trying to make New York City a more equitable and inclusive place; motivating the financial industry to make more room for mom-and-pops would be one way to do it.