Second Annual Business Survey Finds Merchants Still Struggling

How"s business? Just ask Carlos Rossell. â??The bottom of the market fell out a year ago, said Rossell, who for 21 years has managed and owned Blue Moon Mexican CafÃ&Copy;, at 1444 First Ave. on the corner of East 75th Street. â??I approached my landlord, and he lowered the rent for a year. Right now, we"re in a limbo. It"s not just me. There are stores that have gone out of business left and right. It took me a solid year of watching this trend to come to terms with the fact that business isn"t coming back any time soon. Across the Upper East Side, the narrative is much the same: Income is down, rents are still high, landlords too often are unaccommodating and more and more stores are shuttered. â??What do we do? Rossell asked. â??Do we just cut the cord and walk away from our businesses? I don"t want to do that after working here for more than 20 years. A little more than a year after Our Town first surveyed the neighborhood to find out how many stores were closed, reporters returned for an update. The methodology this time was the same: From March 22 to March 25, Our Town canvassed First, Second, Third, Lexington and Madison avenues from East 59th to 96th streets, and York Avenue from East 59th to 92nd streets, counting all the ground-floor, on-the-avenue businesses. The count yielded 222 closed units, a sizable increase from last year"s 175. Six more stores had announced plans to close, while 12 were opening imminently. The overall vacancy rate on the six avenues was 9.89 percent, up from 8.02 percent a year ago. â??It"s only gotten worse, said Malvina Solomon, whose jewelry store is at 1021 Lexington Ave., between East 73rd and 74th streets. â??We got a break on the rent, but this is a co-op and they kept adding charges. There are days we don"t pull in a dime. Her three-year lease includes a rent increase of $1,000 per month every year. Bokhee Coe"s eponymous clothing boutique, at 1077 Third Ave. near East 64th Street, is preparing to close, although negotiations with her landlord continue and a reprieve is still possible. â??I cannot pay the rent, she said. â??My regular rent is $20,000 a month. Sales are going down. I asked for a little bit of a reduction and he said no. The rising number of empty storefronts reflects not only an economy in the pit of a recession, but also the retail idiosyncrasies of the Upper East Side. â??A lot of the industries that were hit hard had Upper East Siders working for them, said Harris Healy, the longtime owner of Logos Bookstore at 1575 York Ave., between East 83rd and 84th streets. â??In terms of neighborhood shopping, a lot of Upper East Siders shop out of their neighborhoods. Every year, office hours are longer, so more people are doing their shopping during their lunch break. Also, a lot more people are ordering online. The situation is also complicated by geography and retail niches. Madison and parts of Lexington are dominated by luxury stores that attract buyers from across the city in a way that the corner deli or neighborhood restaurant cannot. The avenues on the far eastern side of the island are somewhat isolated, and the Second Avenue subway project is wreaking general havoc. For Rafe Evans, a commercial real estate broker at Walker Malloy & Company, such factors add up to a disjointed retail landscape, where the number of stores does not match up to local clientele. By contrast, a survey conducted in February on the Upper West Side found that vacancies in that neighborhood have gone down slightly from a year ago. â??Only Fifth and Park have no retail [for long stretches]. That"s two out of seven avenues, Evans said. â??On the West Side, Central Park West, Riverside and West End have no retail. That"s three out of six. Evans added that some of the perennial optimism about the luxury sector"s staying power appears to have been just plain wrong. â??There were certain false prophets who said that luxury would never suffer and there would always be people who would spend $1,000 on a handbag, he said. â??As with most common sense, that proved to be hogwash. First and Second avenues are clearly the worst off, with vacancy rates of 12.99 and 12.28 percent, respectively. First has 23 more closed storefronts than it did last year. For Rossell, this partly indicates a changing social dynamic. â??My line has always been that tourists don"t land at Kennedy and LaGuardia and say, â??Take me to the Upper East Side," he said. â??This is where the money is, but people are going south at night. Every couple of blocks, you"ll find a place that is doing business. But the area as a whole is terrible, and it"s not just restaurants. Boutiques and bars, too. Rossell has thought about reinventing Blue Moon as a bistro-style restaurant, but when he approached investors, all were scared off by his location, with one of them referring to it as â??the Upper Least Side. Second Avenue, meanwhile, with its closed-off construction areas and decimated, occasionally labyrinthine sidewalks, is hardly hospitable to shoppers. Although vacancies are no higher in the subway construction zones than they are elsewhere on the avenue, the regularity of shuttered stores is remarkable. All but eight blocks in the stretch from East 59th to 96th streets include at least one empty unit. â??No one is signing long-term leases on Second Avenue, Evans said. â??People acknowledge that Second will be more commercially viable than Third, but I don"t know if that will happen in my lifetime. The definition of the word â??eventually" is the crucial question. A store can"t pay rent for 10 years hoping that in 12 years traffic will be great. Lexington, meanwhile, is clearly benefiting from the foot traffic that three subway lines bring. Next to York, it has the best vacancy rate on the Upper East Side, with only 6.42 percent of units unused. Madison has gotten marginally worse (39 empty units compared to 31 last year), but local officials remain resolutely positive. According to data provided by the Madison Avenue Business Improvement District, 13 businesses have opened so far this year and 12 more are currently under construction, including two new J. Crew stores and additional locations for Caroline Herrera and Michael Kors. Within the BID"s boundaries on Madison Avenue, from East 57th to 86th streets, BID president Matthew Bauer said April 4 there were 24 vacant stores. Some properties that appear closed, Bauer said, may actually have a tenant who is working to customize the space. â??I think it reflects that all these luxury brands are in a mood of expansion or development, and they"ve found the perfect spot on Madison Avenue, Bauer said. â??In the last year, you"re seeing the major players in the luxury marketplace voting with their feet and investing in new stores on Madison Avenue, renovating and expanding their existing presence, so there is a continued sense that Madison Avenue is the center for this unique niche in the overall retail marketplace. Some stores can find help at NYC Business Solutions, a city-run organization that assists small businesses and offers a wide range of free or subsidized services, including hiring, training and business planning. The organization can also set up businesses with alternative lenders and help them get government contracts. Michael Kim, an account manager with the division that helps businesses north of 42nd Street in Manhattan, feels his office is underutilized, especially in areas like the Upper East Side. â??We would love more businesses to take advantage, especially those that are looking to hire, he said. â??If we can save business owners time and money in such areas, they can focus their energies on something else, like expanding. But most stores will simply have to be content with waiting out the recession's or just closing up. â??Things have got to get better, Healy, the owner of Logos Bookstore, said. â??Frankly, I think Manhattan is in a funk right now.