What Do New York's Empty Storefronts Say About the Future of Cities?

These days, walking through parts of Manhattan feels like occupying two worlds at the same time. In a theoretical universe, you are standing in the nation’s capital of business, commerce, and culture. In the physical universe, the stores are closed, the lights are off, and the windows are plastered with for-lease signs. Long stretches of famous thoroughfares—like Bleecker Street in the West Village and Fifth Avenue in the East 40s—are filled with vacant storefronts. Their dark windows serve as daytime mirrors for rich pedestrians. It’s like the actualization of a Yogi Berra joke: Nobody shops there anymore—it’s too desirable.

A rich ghost town sounds like a capitalist paradox. So what the heck is going on? Behind the darkened windows, there’s a deeper story about money and land, with implications for the future of cities and the rest of the United States.

Let’s start with the data. Separate surveys by Douglas Elliman, a real-estate company, and Morgan Stanley determined that at least 20 percent of Manhattan’s street retail is vacant or about to become vacant. (The city government’s estimate is lower.) The number of retail workers in Manhattan has fallen for three straight years by more than 10,000. That sector has lost more jobs since 2014, during a period of strong and steady economic growth, than during the Great Recession.

There are at least three interlinked causes. First, the rent, as you may have heard, is too damn high. It’s no coincidence that retail vacancies are highest in some of the most expensive parts of the city, like the West Village and near Times Square. From 2010 to 2014, commercial rents in the most-trafficked Manhattan shopping corridors soared by 89 percent, according to ­CBRE Group, a large real-estate and investment firm. But retail sales rose by just 32 percent. In other words, commercial rents have ascended to an altitude where small businesses cannot breathe. Some of the city’s richest zip codes have become victims of their own affluence.

Second, the pain of soaring rents is exacerbated by the growth of online shopping. It’s typically simplistic to point at a problem in the U.S. and say, “Well, because Amazon.” But it is no coincidence that New York storefront vacancy is climbing just as warehousing vacancy in the U.S. has officially reached an all-century low: A lot of goods are moving from storefronts to warehouses, where they are placed in little brown boxes rather than big brown bags.

Walking around the Upper East Side, where I live, I find it striking how many of the establishments still standing among the many darkened windows are hair salons, nail salons, facial salons, eyebrow places, and restaurants. What’s the one thing they have in common? You won’t find their services on Amazon. The internet won’t cut my hair, and not even the most homesick midwesterner goes online to order a deep dish to be delivered from Chicago to New York. Online shopping has digitized a particular kind of business—mostly durable, nonperishable, and tradable goods—that one used to seek out in department stores or similar establishments. Their disappearance has opened up huge swaths of real estate.

One might expect that new companies would fill the vacuum, particularly given the evidence that e-commerce companies can boost online sales by opening physical locations. But that brings us to the third problem: Many landlords don’t want to offer short-term leases to pop-up stores if they think a richer, longer-term deal is forthcoming from a national brand with money to burn, like a bank branch or retail chain. The upshot is a stubborn market imbalance: The fastest-growing online retailers are looking to experiment with short-term leases, but the landlords are holding out for long-term tenants.

New York’s problems today are an omen for the future of cities. Most people don’t live downtown because they love drifting off to the endearing sounds of honking cars and hollering investment bankers. Rather, they want access to urban activity, diversity, and charm—the quirky bars, the curious antique shops, the family restaurant that’s been there for generations—and the best way to buy that access is to own a bedroom in the heart of the city.

What happens when cities become too expensive to afford any semblance of that boisterous diversity? The author E. B. White called New York an assembly of “tiny neighborhood units.” But the 2018 landlord waiting game is denuding New York of its particularity and turning the city into a high-density simulacrum of the American suburb. The West Village landlords hoping to lease their spaces to national chains are turning one of America’s most famous neighborhoods into a labyrinthine strip mall. Their strategy bodes the disappearance of those quirky restaurants, curious antique shops, and any coffee shops that aren’t publicly traded on the NYSE.

In Jane Jacobs’s famous vision of New York, the city ideally served as a playful laboratory, which nursed new firms and ideas and exported its blessedly strange culture to the world. Today’s New York is the opposite: a net importer of the un-weird, so desperate to bring in national chains to pay exorbitant leases that landlords are willing to sit on barren blocks.

Economics assures us that, in the long run, prices and strategies move toward an equilibrium; macroeconomics abhors a vacuum even more than physics (but apparently less than Fifth Avenue landlords). As vacancies pile up, one would think that desperate property owners would lower the rent to make room for a new generation of unique shops. In this vision, today’s vacancies are a necessary torment, the grassland fire whose ashes will nourish new native species and bring forth a better ecosystem. And, jeez, how many Wells Fargos and Duane Reades can one city block take?

But in the past five years, the problem of rising vacancies and monotony has actually gotten worse. It would be one thing if New York were simply trading eccentricity for accessibility—that is, knocking down fusty establishments to build new apartments with affordable housing. But the median home value in Manhattan is still over $1 million. For both middle-class families and emerging companies looking for a foothold in the city, it’s the same dispiriting picture: rising returns to incumbent businesses and legacy wealth, with fewer chances for the upstarts, the strivers, the rest.

“America has only three cities,” Tennessee Williams purportedly said. “New York, San Francisco, and New Orleans. Everywhere else is Cleveland.” That may have been true once. But New York’s evolution suggests that the future of cities is an experiment in mass commodification—the Clevelandification of urban America, where the city becomes the very uniform species that Williams abhorred. Paying seven figures to buy a place in Manhattan or San Francisco might have always been dubious. But what’s the point of paying New York prices to live in a neighborhood that’s just biding its time to become “everywhere else”?