new york city council today will be talking about neighborhood small businesses the challenges they are facing and possible solutions one of the issues i hear most from constituents is the ongoing closure of locally owned businesses and with every business business lost residents grow more concerned that the upper west side is losing part of its unique character and perhaps more importantly its sense of community soaring rents changing consumer habits and specifically family circumstances have all played a role in this story and amazingly the number of businesses on the upper west side actually grew from two thousand to two thousand and fifteen last fall my office released a small business health report we found that the upper west side has a twelve percent commercial vacancy rate other manhattan retail centers like times square herald square and soho have vacancy rates that are far higher today's discussion and will help us gain some perspective on what's causing vacancy rates including online retail services like amazon and finally will to about some of the solutions policymakers can implement to help small businesses thrive joining me thank you so much for being here today both of you thank you does it i'm going to start with you as a commercial real estate broker you negotiate between the landlords and the tenants in many ways you represent both interests  are you seeing a trend to more vacancies on the upper west side is it higher turnover but with replacement coming in and what are the factors you  see that are causing these town to so i would say in general just as you mentioned that there has been a prolification of some new businesses on the upper west side the upper west side continues to be an amazing place to live and to do business are there challenges yes there are there are vacancies and there's a lot of reasons for those vacancies there's macro so that would be the economy in general in e commerce as you touched on it does have impact there's also trends that happened  example there was a frozen yogurt trend everybody had frozen yogurt and they were amazing and then eventually they all kind of imploded and they're gone that happens a lot and if you look back you know over the decades there are trends that happen so there's macro and micro e commerce is definitely a factor but i'm happy to report that some of the major retailers and smaller retailers are starting to use e commerce as a complimentary method in their sales so for example you can go into a store if they don't have the particular product in inventory you can order it online if you buy something online you can return it they're trying to drive traffic both ways and so i would say that  there are many challenges ahead and i'm happy to go into any of those that you like great you know speaking of that example chris i've done your store i've gone and asked for a book i didn't have it you guys ordered it for k well the challenges are to a great extent brought on by high rents but i think the biggest challenge for for us our commodity is the leading the start off product for amazon books and so we know more than anybody what it's like to have our lunch eaten and i think that it really is a significant thing small businesses large businesses in retail have a very small margin and if you take fifteen or twenty percent of our sales off the top big it becomes very difficult to survive but now we've seen the proliferation of every kind of good and service our building every building every u p s truck you see is just flooded with these with these packages and and what i think we have to address is finding a way to have the city equalize the the cost of doing business in the city so that we are competitive we don't want to make buying online so expensive that that are our constituents revolt but by the same token we can't have people coming in and unloading boxes all over the street clogging our streets who are trying to do business and paying no taxes to keep up our city right and recently i think amazon agreed to pay taxes but the independent sales tax write the sales staff with the differences with our staff for example we have every dollar of let's say every hundred dollars of sales we make about twenty dollars goes to to payroll in warehouse fulfillment and on line operations it's much much lower and what that means is that every single dollar that you spend in our store results first of all it's wages that are paid in the city one hundred percent of the money that comes through our till goes to our payroll goes to our landlord and goes to the city twenty five percent of our sales goes to our payroll that payroll goes to the local rent those dollars get used in grocery stores on the subways etc the money that goes to warehouse people working outside of our city goes to those townships and so forth they do not support the and anywhere near the same way so it's almost helping new york city residents change of mindset change a culture while i think we've got to we've got to tax the things coming into this city in a way that produces revenue equalize the playing field as long as it's cheaper to have stuff show up at your door there's going to be an economic reality that we just can't overcome by by kind of humanizing the story and getting people to go with it we can't fight the economic trend that much that's why we've always had success with costco and wal mart and they've undercut so much of the luscious fabric of our of our broad ownership and the fabric that we that we really thrive on that that's why you're on this show so thank you so much in two thousand and twelve then council member gale brewer successfully advocated for an upper west side commercial zoning overlay and the overlay in its essence limited the physical space of the commercial storefronts along sections of amsterdam and columbus with more minimal restrictions on broadway and i think also moved banks to the second floor stabilizing the number of store fronts on him stimming columbus and possibly preventing the displacement of existing businesses for store front  possibly help to contribute for a low vacancy rate the impact on chain stores is less clear what it what have you seen over the ensuing five years so i thought leave that that law was very well intended i have great respect for president joe brewer i wasn't in favor of the legislation because i felt that i didn't want to create any barriers to entry on the upper west side now the timing was very important so when this law was enacted and again well intended the prolification of banks and drug stores actually started to slow down around the same time the other interesting thing about amsterdam and columbus is that for the most part not and there are exceptions to this some of the buildings are smaller so the ability for them to physically combine were limited anyway so i think i don't think the results i don't think we really know what those results are we may not know for many years because you do i have ten cycles and trends in the economy so it's hard to know exactly the impact i was concerned again that anyone that wants to do business on the upper west side whether it be a mom and pop or a mid level business or big bucks would be prohibited i don't want to create any barriers to entry in the upper west side you talked about the ten year lease cycle is that and maybe this is for both of you is that is that a good amount of time for both the tenant and the landlord ten years or does that benefit one or the other more i think it benefits both we as i like to call this is kind of a ten year town on unleased terms most things are done on a pro forma business plan is done over ten years mortgages you can from the perspective and the tennis perspective so if you're investing in a business you have to have probably at least ten years to amortize your investment on construction and build out inventory and all the other kept an op ex that you would have so i do think ten years is about what most tennis want  and landlords to even longer in some cases there's options to renew and so on you see it goes by very quickly it goes by very quickly and certainly with housing affordable housing you know the forty years goes by very quickly if we're regulating the market for ten years most just go by very quickly which point you know the cost of real estate has gone up so much sometimes in some places in some markets i think there's a the problem with the the end of the lease is that when you have a company which has done well in an area the benefit often redounds only to the landlord and the rents can become too high for the kind of business that opens and helps establish that neighborhood and builds a base and they can then only be we can't ask a landlord not to take twice as much rent and have a national brand come in that would be ludicrous to to the landlord but i think that if i can propose a radical idea i would propose that i think we have to recognize the value whether somebody is paying r in under served neighborhood and lives there for twenty five years and is then unable to pay rent or for a business which comes in and foundationally develops a neighborhood i think that that that company just like the landlords deserves to share in the building of equity and that's not built into our process so what i would propose is that for tenants of residential as well as real estate that is for commercial use  especially storefront commercial use that is so fundamental to what our city is like we develop equity as well just by being there and that we contractually are engaged in the future development whether that's in  necessitating a reasonable rent for a second term or whether it's actually being a share in the equity by forcing a buyout for example i've earned one hundred thousand dollars if you're going to raise my rent twice i'll take it and go but something has to be redound to the benefit of the businesses which come in establishing run their places for ten years you know commercial landlords would say their business is high risk high reward right if the market goes south and you get out of your lease they're still left holding the bag with a lot of debt right i mean maybe smaller on the scale of amsterdam and columbus bigger  many cases what we what we don't want to see is smaller businesses come in establishing there was a set and really the foundation of development of that equity but not be able to share in it and i think that what further we don't want to see is is some of the fundamental things we need in a neighborhood be taken away because that kind of service or good can no longer provide the kind of rent that is available and so both those things have to be answered because we don't want to have just a branding operation going on like we haven't for example lower columbus avenue right it's not quite as healthy and it's not as it's not as diverse and it's not bringing to the city the same revenue so in any sense yeah because if we put a national brand into a store we no longer have an owner in there we have equity ownership that is owned by stocks in probably hedge funds and pension plans before that and when by people all over the world yeah that's how wall street works that's so if we pour of those brands in there a lot of the profit of that company is going out i think it's not one hundred percent we no longer have an owner we no longer have a guy or a gal or a family that is running a business that is going to the school board and paying attention and who's giving three hundred dollars when they have the option and all of that stuff right and similarly i think we're seeing  nd verify this so i'm going to make one thoroughly unscientific assertion that more and more the landlord the commercial landlord is not local and so to the extent that the building itself gets sold to a national company or international company similarly they're not invested in the street or the community and might feel more willing to let the store front sit vacant because they're just waiting for a higher you know someone that can come in and spend more money on the brand where they care about the street life being vibrant or not and by the way i would argue that the street life particularly along amsterdam also columbus is very lively i would like to point out there are some terrific local landlords that are huge the guy we work with that rock rose in long island city is just terrific and they're putting up there basically on our own so building a new city was not one before and they have determined to reach out and find locally owned businesses to help flesh out that neighborhood to bring in restaurants retail coffee shops and i think that the people of spirit thinking the same way they're there progressive in their thinking about the character of a neighborhood that's the best kind of people we want i think that yeah i think local their local own they're all different kinds of landlords and by the way let's not forget there are mom and pop landlords too so there's everything on the upper west side from the mom and pop individual one building owner to mid level owners to international or real or national real estate investment trusts and all of them they do have one common thread which is income but i can also say that for the most part they can see is just about every landlords enemy there are some landlords that have different reasons that they may have vacancy or not seem to care but most i don't i have yet to meet a landlord that doesn't want their store rented unless they're trying to put an assemblage together which is an issue you know related to the two thousand and twelve legislation the good news is and there's a lot of doom and gloom and we see it and we hear about it the good news is that some of the rents have come down and some of the landlords that are willing to work can lower their rents if they're not over leveraged have seen the light or are seeing the light and there is now a re entry of mom and pop businesses i'm very excited about that there were a lot of businesses that were proclivity from being on the upper west side in other parts of the city and perhaps even the country that now can come back in which is very exciting i think it's a great time to do business and yes that also goes true you know holds true for people that are coming in from out of state or even out of the country tenants that are coming in they're excited to do business it's opportunistic but it's also very optimistic i'm happy to say that there is a silver lining in the fact that the vacancies created you know and need and the landlords you know one of the issues also is is  if you have an old time landlord multifamily you know multigenerational family owner they are like not likely to be so leveraged and they have more ability to lower their rents or have more flexibility there are owners perhaps that have bought very very high and are very highly leveraged and they are in debt and they have other pressures and so as much as they may want to lower rents they may not be able to get that piece that i've seen where i know of a building owner that and the reason is because if he brings his price down for that rental it lowers the value of the building and he's trying to sell the building so it's it's more it's worth it to him to leave it vacant because then he can tell a potential buyer oh no this is worth you know x plus ten for square foot not not just x so the leveraging in the you know the wanting to sell but there too you know it's not somebody who necessarily wants to invest in the community one of the things i wanted to say was that i think that one of the overall perspectives we have to take as citizens is government is to look at all of our all of our store front property is an asset that we have to tap and if someone is unfortunately over leveraged and that's the situation and there's many situations where space remains entry empty i think we have to think about ways to impose something upon the landlord gets that space working again for the city it's every thousand square feet of space has some number of jobs and payroll  so i would say give a small amount of time when you can have your space open three months and then start imposing and earning fifty you're not going to if you're not using your space for the city then get out of the way i have a question where so every lead that i've ever represented i have yet to meet a landlord that wants to keep their stores vacant they try and they hire me or other brokers to to rent their space in the instance that you just in the example you just mentioned about some who's selling their building well there's two different schools of thought on that do you rent a space and then try to sell your building with a certain amount of income or do you keep it vacant for the new owner to do what they want to do and they're both valid perspectives and some landlords feel that they want to lease it up and then sell it and do the  opposite but you know to impose a penalty on a landlord who may already be hurting because of the vacancy seems odd to me that i don't lease in the examples in the the properties that i'm  you know diligently trying to lease and there's different reasons why those properties may not have leased yet it could be the economy it could be that it could be the location location location it could be the actual physical attributes to the property if there's too many columns it's not wide enough whatever it is there's there's a reason so i absolutely get it when you think about someone warehousing something and purposely leaving something empty which is really hurting our neighborhood but most landlords that i know are not willfully doing that i think you're right i think it's complex but i think there's a lot of situations where we need to do more than just impose a tax i think we have to make a path to fulfilling the space is possible a lot of times it's access to capital a lot of times it's putting the right kind of business in front of in front of you and i think that the city could do a lot more to do that there could be a city wide  path for businesses that want to expand into certain neighborhoods so you could go knocking and and make these matches happen and there could be better access to capital that probably a lot of underfunded landlords who have great space they can't redo it neither can you find because come there and spend three hundred thousand dollars to do it but we can find that money we can make these pairings happen it's not simple but we can make that we can find solutions you know and if greg bishop were here i'm going to come to his defense because he and he's the commissioner for the department of small business services and i've spoken extensively about it he would argue that you may not know about it but there is access to capital through the city maybe not enough maybe we don't let enough people know about it but small business services does provide some things i want to jump to one of the topic very quickly i don't want to let it go and it's something that you brought up in terms of leasing spaces and there was a situation that you and i dealt with where even in the first step in leasing out of space the government put up a hurdle and it had to do with the landmark preservation commission saying oh no you can't make this change to  internal something that kept the small business from going in despite both our efforts to expedite it when it had to have taken six to nine months and we almost lost that business on the upper west side so first and foremost with regard to l p c i love new york architect architecture i love beautiful buildings throughout the country throughout the world throughout our city so i am not in favor of destroying the the beauty that we have in our neighborhood however yes you're referring to an example of a tenant that was actually came in from it's an international company but it's a small business hair salon that wanted to open and they could not get their permits because of a violation on the other side of the building unrelated to what they were doing on the interior and it took them about eight months to finally get their permits so i felt that some of those decisions were were not made in a timely manner and it really really hurt the commerce so just like you mention what happened there while that space continued to stay empty so there was less activity and arguably safety on that block the employees were not getting paid so they're not making money and there's no payroll tax an income tax i'm not getting paid as a broker because it's not being leased the landlord is not getting the money and they don't have the money in this case he was at h b o see co op but they don't have the money to do repairs that they needed to do and the city got hurt with that ultimately it got resolved but we almost lost them and so i would like to see that process be streamlined again let me be very clear on the record i love new york architecture and i'm not looking to destroy it but we need to streamline the process of all the municipal permitting because these things really cost there's a certain amount of free rent that a tenant usually gets and if they burn through that they are failing before they've even opened have you encountered any hiccups with this city so one thing that i that i will say has has made it is further distances from a level playing field is the imposition of the minimum wage has been really drastic and i think that was done in a way where we can't take it back now but it was done in a way that didn't consider how much competition we have from areas where that's not something that that's required that's why it's sort of back to the point about you know when you have internet sales what's going on in the original point of you know sending out the product is very different the good news about restaurants is that it's an experience and restaurants are not as affected by e commerce as other businesses and i think a lot of tenants and tenants are trying to do is enhanced the experience so i see you have incredible events at your store which i love by the way and you have book readings and all sorts of wonderful things movie theaters are trying to have more food and beverage right and and some of the larger even developments there incorporating entertainment so whether it be activities food and beverage music this has been as usual a very enlightening discussion i want to thank my guests today on behalf of all residents of new york city we greatly appreciate your time and insight thank you all for watching represent