Here are two numbers about retail in New York that don’t appear to make much sense when paired together.
A recent Douglas Elliman survey found that about 20 percent of all retail space in Manhattan is empty compared with roughly 7 percent in 2016.
Retail employment in the city has increased by 6,000 through July (seasonally adjusted), compared with a gain of only 2,000 during the same period a year ago. The increase in retail accounted for a quarter of the total job increases during the period.
“Retail hasn’t looked this good since 2013,” says David Belkin, who watches the numbers closely for the Independent Budget Office.
Nationally, the retail story is about the revival of brick-and-mortar. Retailers surprised analysts with their strong sales for three months February, March and April. Retail jobs have grown an average of 50,000 since February, according to the National Retailer Federation. The gain in an index of retail stocks so far has tripled the increase in the S&P 500.
The theory of what’s happening was captured perfectly by the New York Times headline Hard Lessons (Thanks, Amazon) Breathe New Life Into Retail Stores. “Many successful stores,” the story claimed, “are now a cross between a fast-food drive through and a hotel concierge.”
In New York Tiffany is embarking on a three-year renovation of its flagship with more hospitality offerings. Tiffany gets some 90% of its revenue from its stores.
Tuesday I headed over to Macy’s flagship 34th Street store and I was pleasantly surprised from my last visit a couple of years ago. It seems brighter, more organized and just more inviting.
The moves are paying off for Macy’s shareholders. Its stock is up 67% in the last year compared with only a 16% increase in the S&P 500. At $36 a share, it is near its 52-week high.
So what gives with the worrisome increase in vacant stores. The New York mantra is that rents are too high, and that is surely a factor though they are going to come down. More important is that a large number of smaller, local retailers simply don’t have the wherewithal to compete with online retail. As online ventures continue to expand to virtually every niche—from mattresses to shaving supplies to any kind of food one wants—the squeeze will get tighter and tighter.
One final “but” is important. It isn’t clear whether the rebound in store-based retailer is temporary, helped by an across the board surge in consumer spending. Only time will tell.