As the coronavirus devastates New York’s retail economy, making it hard for stores to pay rent, co-op buildings with ground-floor stores are losing a vital source of income. Already stressed co-op shareholders have had to pick up the slack, in some cases with maintenance charges increasing by as much as 40 percent.
“It’s a huge problem,” said Michael Wolfe, the president of Midboro Management, who added that residents are grumbling about the extra costs, as they also struggle with reduced work, furloughs and layoffs.
But Mr. Wolfe said that most residents realize that “anything is better than a vacancy,” adding that co-ops would face long odds at finding replacement tenants during the pandemic.
Also driving the decision to accommodate stores rather than evict them is a desire to preserve the convenience of having on-site shops, board members say. Other co-ops want to preserve jobs of employees who have become like family members after years of operating businesses under the same roof, like at 230 West 105th Street, a 14-story co-op at Broadway in the Manhattan Valley neighborhood.
Its board has hiked maintenance fees 15 percent, which for a one-bedroom means a jump to about $1,400 from $1,200 a month, to make up for rent breaks and discounts offered to the four stores that ring the prewar building’s base. That aid, which is benefiting a clothing store, coffee shop, deli and cobbler, is the equivalent of as much as a 50-percent rent cut, according to the board.
“One shareholder called the move unconscionable,” said Robert Chasen, the treasurer of the 70-unit doorman building, which because of the pandemic postponed its annual meeting from its usual time in May to November. According to Mr. Chasen, about half of the apartments in the building are occupied by people on fixed incomes or who are working-class.
“But most neighbors say they are supportive,” he said. “These stores contribute to our neighborhood.”
The co-op’s largess, however, may only be postponing the inevitable. “Our business has been severely, severely, severely impacted and may still have to close,” said Carolina Conigliaro, whose father, Fernando Andrade, owns the cobbler shop, named Andrade Shoe Repair.
Speaking on behalf of her father, an Ecuadorean immigrant who speaks limited English, Ms. Conigliaro said that a drop in commuters has led to a decline in requests for repairs of heels, holes and zippers. Revenue is now often as little as $40 per day, she added, down from highs of as much as $1,400 per day before the coronavirus slammed New York.
“We have never seen anything so heartbreaking,” added Ms. Conigliaro about the shop, which has leased space in the co-op for four years, and which was located a block away for 32 years before that.
Rents cuts are only one consideration. A punishing retail climate, in which workers and tourists are staying home and not shopping, is occurring at the same time as a major shift in store ownership for many co-ops that were created in the 1980s.
Because of the complicated methods by which co-ops are created, third-party landlords often control buildings’ storefronts under long-term master leases. Co-op apartments upstairs usually receive some of the retail rent money. But the amount is usually just a trickle compared with what the landlords rake in, lawyers say.
Many of the master leases date to the 1980s when many of the buildings converted from rentals to co-ops, and after exhausting all of their renewal options, the firms that own those master leases are preparing to relinquish them — allowing many co-ops to finally take over their retail square footage.
The timing is less than ideal, said Jeffrey Reich, a real estate attorney with Schwartz Sladkus Reich Greenberg Atlas, a New York firm, and a co-op adviser. “These buildings wanted their retail back for years and now no one wants it,” Mr. Reich said. “It really is ironic.”
The retail economy had been deteriorating even before the pandemic because of steeps rents and competition from online shopping. In the third quarter, which ended in September, asking rents in Manhattan’s main shopping areas fell to $659 a square foot, the lowest rate in nine years, according to the real estate firm CBRE. And the number of available ground-floor storefronts in Manhattan increased to 254 in the third quarter from 235 in the second quarter, representing a new record, CBRE said.
Only about a quarter of the hundreds of co-ops in Manhattan are anchored by storefronts, and managing agents estimate that even with recent turnovers, co-op boards still control only about half of the shop-lined buildings.
For boards that have long been salivating about the thought of recapturing their retail spaces and getting a boost in revenue, the dismal…
Read More: Maintenance Fees for Some Co-ops Rise to Cover Lost Commercial Rent