NEW YORK CITY – New York City Council has unveiled a rent control plan that will implement commercial rent stabilization citywide. Under the legislation called Intro 1796, a City Council-appointed board will set annual lease increases on retail, professional service, and manufacturing storefront space instead of landlords.
As the commercial real estate sector digests the new legislation, many are trying to draw connections of the proposal and its pertinence to the different aspects of retail, Scott Plasky, a retail specialist with Marcus & Millichap, tells GlobeSt.com.
“There are too many moving parts when it comes to retail. Each storefront can be different. Ten feet can be a different trade area. Some spaces have great frontage some have none,” he said. “I understand what they are trying to do to get rid of some of the vacancy and keep core mom and pop tenants in business, but I don’t think this is the way.”
Councilmember Stephen Levin of District 33 representing Downtown Brooklyn and who is leading the effort says the legislation is meant to prevent further vacancy across the city due to rising rents that have pushed out local businesses and increased the price of services and goods altogether in the boroughs. “A regulated system for commercial spaces would set a reasonable and proportionate rate across the board for rent based on the need,” Levin said in a prepared statement. “Time and time again, we’ve seen businesses shutter in my district and throughout the city due to rent increases that are beyond their capabilities.”
Meanwhile, some members of the commercial real estate industry view the bill as reductive to solving burdens small businesses face and will lead performing retailers to exit the market, according to a statement released by the Real Estate Board of New York.
“Rent increases come up, but it really depends on the type of business affected, and is more pronounced in some commercial districts than others. It seems to me we should be looking at a comprehensive set of reforms in a true effort to save our neighborhood small businesses,” said Randy Peers, president & CEO of Brooklyn Chamber of Commerce, in a prepared statement.
According to data cited by the city council, retail rents rose an average of 22% citywide, with some neighborhoods seeing more than a 50% rent increase on average. James Whelan, president of The Real Estate Board of New York, says the data doesn’t tell the full story.
“Data shows that retail vacancy rates are driven by rising property taxes, longer wait times for government approvals, e-commerce and various other factors,” Whelan said in a prepared statement.