The State of Storefronts 2023: Beyond Recovery

Small businesses are the backbone of New York City. Of its approximately 220,000 businesses, 89% have fewer than 20 employees. Small storefront businesses – such as eateries, bodegas, hair salons, laundromats – make up the cultural fabric of our neighborhoods: especially in our immigrant communities and communities of color, residents rely on their local storefronts for essential, culturally relevant goods and services, as well as jobs. But those essential businesses are under dire threat, due to the systemic lack of protections and power imbalance between small business owners and their landlords. 

ANHD’s new analysis of both citywide reporting and a survey of 121 merchants who own storefront businesses shows that threats to small businesses are consistently higher both in communities of color and to small business owners who are people of color and immigrants themselves. 

During a time of great economic hardships caused by the COVID-19 pandemic, real estate speculation has driven a rapid rise in rent in many communities of color and immigrant communities. ANHD’s analysis shows that commercial rents have risen vastly beyond pre-pandemic levels, which were already burdensome for many small businesses. These rising rents are more prevalent in communities that are predominantly people of color. 

Within a landscape of rapidly rising rent, the lack of structural protections for commercial tenants puts small businesses at the mercy of the speculative rent market and multiple forms of harassment and displacement pressure. Many commercial tenants do not have a lease, even those in business for decades in the same location; those businesses are ineligible for many grant and loan programs. Our survey showed that our neighborhoods’ critical small businesses are facing multiple threats of closure and relocation, rising rents, rent and utility debt, personal liability for rent, and tenant harassment. 

While economic development programs over the last three years have focused on COVID-related recovery, for many of New York City’s small businesses in communities of color and immigrant neighborhoods, a recovery to pre-pandemic conditions did not occur. Furthermore, a return to a pre-pandemic baseline would not be sufficient for these businesses to survive and thrive. Prior to the pandemic, many storefront businesses were already struggling to keep up with rising costs and facing severe displacement pressure.

In addition to rising costs, opaque systems and a lack of resources and support create an additional burden, particularly on business owners who are immigrants and people of color. Language access and targeted outreach are necessary for many of these business owners to learn about and successfully apply for grant programs. They may be turned away from traditional banks and have trouble finding alternative lending options to finance their businesses. Undocumented business owners, of which there are an estimated 48,000 in New York City, face particular challenges in accessing capital due to a lack of formal credit, among other challenges. On top of that, as commercial tenants negotiating lease terms, they may speak a different primary language from their landlord’s, making an already imbalanced relationship even more challenging. 

While this report focuses on commercial tenants, they are not the only small businesses that are critical to our neighborhoods’ functioning: street vendors face myriad threats to their survival as well, such as overpolicing and lack of access to permits. The threats to commercial tenants and street vendors are intertwined; when investors gamble their capital on the gentrification and heightened value of land in a neighborhood, it leads to the displacement of tenants, businesses without a brick and mortar space, and residents alike. We maintain that the stabilization of our small businesses is a critical component of the health of our neighborhoods and communities. 

The ecosystem of a healthy commercial corridor includes storefront small businesses, street vendors, and local residents, all of whom face displacement risks and need protection. To address this instability in New York City’s commercial corridors, a framework of recovery is not enough. We must build the power of commercial tenants who fuel our neighborhoods but lack legal protections and face grave displacement pressure. Organizing merchants as a group with shared political identity and interests can shift the focus of economic development beyond just recovery to one that centers the health of the critical small businesses that make up the fabric of our neighborhoods. 

Storefront registry data shows large increases in rents, particularly in communities of color.

Since ANHD and USBnyc won the passage of Local Law 157 in 2019, the Department of Finance has published statistics on vacancies, median rents, and other metrics for ground-floor and second-floor commercial spaces in most of New York City. This data is aggregated at the council district level, allowing us to see trends since 2019. ANHD first published an analysis of rent trends, as well as vacancies, in our 2022 State of Storefronts report. Our 2023 analysis examines changes from 2019-2021, the most recent data available, allowing us to see the changes in citywide rents well into the height of the pandemic. 

Analysis of this data indicates that commercial rents overall in New York City continued to rise despite the economic impacts of COVID-19. The pandemic caused major losses in revenue for countless small businesses, many of whom are also commercial tenants. Borough and council district breakdowns of the data reveal the uneven landscape of rent increases throughout the city.

Citywide, storefront rents increased 10.9% between 2019 and 2021, but those increases were uneven.

Manhattan is the only borough in which storefront rents declined from 2019 to 2021. Median monthly rents started much higher in Manhattan, at $9.00 per square foot, versus less than $4.00 per square foot in other boroughs. This could indicate that Manhattan rents were over-valued before the pandemic; in fact, speculative warehousing of storefronts was a major concern. It is also due to large-scale office closures and many offices shifting from in-person to remote or hybrid work. 

Brooklyn, Queens, and the Bronx all saw significant increases in median storefront rents despite the economic downturn of the pandemic. Those boroughs had monthly median rents ranging from $3.00 per square foot in the Bronx to $3.67 per square foot in Queens in 2019, and the borough-wide increases ranged from 9.0% in Queens to 22.9% in Brooklyn.

At a council district level, increases occurred primarily in Upper Manhattan, the Bronx, Queens, and Brooklyn.

The council districts with the largest rent increases were distributed across Queens, the Bronx, Brooklyn, and Upper Manhattan:

• District 31 in Rockaway, Queens, at 37.5%

• District 16 in the Highbridge, Grand Concourse, and Crotona neighborhoods of the Bronx, at 33.3%

• District 33 spanning Greenpoint to Downtown Brooklyn, at 28.5%

• District 19 in Northeast Queens, at 25.3%

• District 9 in Central Harlem, at 25.0%

This more granular view offers more nuance than the borough-wide level, which showed a rent decrease overall for the borough of Manhattan. However, Upper Manhattan, which is both lower-income and home to more people of color than the rest of the borough, also saw major increases in rents: 7.5% in Council District 10 (Washington Heights and Inwood) and 25% in District 9 (Central Harlem).

More people of color live in areas of New York City where storefront rents increased during the pandemic. 

In districts where rents increased from 2019-2021, 72.1% of the population identifies as a person of color, compared to 47.2% of the population in districts where rents decreased during that period. This disparity points to the particularly forceful displacement pressure experienced by communities of color in gentrifying neighborhoods, many of which were historically redlined and disinvested. Rising commercial rents contribute to the displacement of small businesses that provide culturally-specific goods and services in these communities. This mirrors the pattern we encountered in last year’s report, which also showed a major disparity in the racial demographics of council districts where rents increased versus where they decreased.

In the Kingsbridge neighborhood of the Bronx, where the City is, for the third time, undertaking a redevelopment process for the Kingsbridge Armory, merchants are organizing to resist the displacement that often comes with large-scale redevelopment. Many of the merchants who own storefront businesses do not have a lease and are constantly negotiating rent increases with their landlords. Without a lease, they may face untenable increases if the Armory redevelopment triggers upward rent pressures. 

One of these merchants is Lucy, who owns Lucy’s Flower Shop.

“We haven’t had a lease for many years…They threatened us that they were going to get rid of us, and it was traumatic because we didn’t know where we were going to go.”

Disparities for merchants of color and immigrant merchants

Within a landscape where commercial tenants have limited ability to negotiate and hold landlords to fair terms, merchants of color and immigrant merchants in particular face the negative effects of landlords’ outsized power. Of all survey respondents, 59.6% self-identified as a person of color and 82.7% identified as an immigrant. Using these responses, we examined disparities among various categories of risk to small businesses.

Note: We received 121 total responses to our survey, but self-identification questions as person of color and immigrant were added partway into surveying; therefore, only 104 merchants responded to these self-identification questions. Where we dis-aggregated data by these identities, we excluded the 17 responses lacking that self-identification. 

Merchants of color were more likely to potentially relocate in the next year, be personally liable for rent, owe back rent, owe utilities, and have experienced harassment, and less likely to have a lease.

Merchants who identified as people of color were more likely to face the following displacement threats than merchants who identified as white. They were 27.4% more likely to plan to or potentially relocate in the next year, 41.3% more likely to owe back rent, 68.0% more likely to owe utilities, 17.9% more likely to be personally liable for rent, 90.0% more likely to have experienced harassment, and 7.0% percent less likely to hold a lease. 

Immigrant merchants, many of whom are people of color, were more likely to potentially relocate, be personally liable for rent, have had their rent increase at least 10% in the last year, and owe back rent.

Immigrant merchants made up a large portion of respondents: 82.7% of those who self-identified. The displacement threat discrepancies for immigrant merchants were slightly different than those who identified as people of color. Immigrant merchants were 28.8% more likely to plan to or potentially relocate in the next year, 28.0% more likely to have had their rent increase at least 10% in the previous year, 22.6% more likely to owe back rent, and 5.4% more likely to be personally liable for rent versus non-immigrant merchants.

Rent increases since before the pandemic have been uneven across New York City, and neighborhoods where people of color and immigrants live have been more likely to see rising commercial rents. Many of these merchants themselves are people of color and immigrants who have been doing business in their storefronts for decades and are cornerstones of their neighborhoods. These merchants, however, face serious displacement pressure, leading to too much displacement and closures. We need to organize merchants and build a structure of protections and resources so we can keep them in our neighborhoods.

Storefront registry data analysis: ANHD used Storefront Registration Class 2 and 4 Statistics in order to analyze changes in monthly median rents by council district, borough, and citywide from 2019-2021. Data is pre-aggregated by those geographies based on required reporting for all tax class two and four property owners with ground-floor or second-floor storefronts. Some reporting is required for tax class one properties, but those numbers are very small and excluded from our analysis. 

The Department of Finance only publishes rent data at a census tract, council district, borough, and citywide level, obscuring data points for individual storefronts. The data is also based on landlord reporting, which by nature is incomplete. We do not know how many owners of storefront businesses fail to register or correctly report their rents.

Racial demographics: To understand the demographics of districts where rents increased, stayed the same, or decreased during that time period, we used Census Decennial 2020 data on race. Despite limitations in Census data collection and representation among marginalized groups and particular challenges during the 2020 COVID-19 pandemic, decennial data collects data for the entire population rather than estimating values based on sampling. Therefore, it should be more accurate and does not require the omission of many census tracts due to large margins of error the way that American Community Survey data does. Decennial data collects information on race and ethnicity, but not whether one is foreign-born or their income. Therefore, we limit the demographic analysis in this report to race. In our demographic analysis, we define “people of color” as anyone who identified themselves as a race other than “white alone.” To calculate the share of people of color by council district, we took total values, joined them to 2020 census tract geographies, took the centroids of those geographies, and assigned them to the council district they fell within. We used council district boundaries that are currently accurate, rather than the new boundaries that will take effect on January 1, 2024 as per the redistricting process. 

CMOP survey: The CMOP survey was co-designed by ANHD, organizers, and merchant leaders to understand on-the-ground conditions faced by storefront businesses in several culturally important commercial corridors in New York City. The organizations who administered the survey and the surveyed commercial corridors were Chhaya CDC in Jackson Heights, Asian American Federation in Elmhurst, Rockaway East Merchants Association (REMA4US) in Far Rockaway, Cooper Square Committee in Lower East Side/Loisaida/East Village Manhattan, and the Yemeni American Merchants Association in Little Yemen. The survey was administered from October 2022 to January 2023. 

View data tables showing the number of respondents and share of respondents for survey questions referenced in this report. 

The research team who analyzed results included ANHD’s Senior Research and Data Associate, Lucy Block, the Small Business Services Strategic Impact Grant Coordinator, Gina Lee, and interns Sammi Aibinder and Kellie Marty. The team worked iteratively to identify relevant survey questions and responses to understand the conditions and threats faced by the merchants who responded, and presented early findings to CMOP partner organizations to receive feedback on the analysis. 

For more information on our analysis, contact comms@anhd.org.