Photo by: Marc Fader
For many years, chain businesses showed relatively little interest in New York City because of worries about crime and high land prices. Those concerns have largely disappeared.
Local schoolchildren have vied in the Bay Ridge Community Council Halloween Art Contest since 1953.
“It’s a tradition,” says John Logue Jr., the second-generation owner of Hinsch’s, a 62-year-old diner and ice cream parlor on the corner of 86th Street and Fifth Avenue. Logue is also the president of a newer institution, the 86th Street Business Improvement District, which he helped start 10 years ago.
Each year, the Halloween Art Contest begins in September—during the first week of school—when children in two dozen schools around the neighborhood are asked to paint holiday pictures. Eventually, winners are chosen in each age group, and come Halloween, these winners are invited to paint their pictures on store windows.
Meanwhile, Logue goes from store to store seeking access to the windows. It’s a task that used to be a formality among the neighbors Logue had known since childhood, but it has grown more difficult as these shopkeepers have given way to a rotating cast of national-chain-store managers.
“It’s getting harder and harder to get people to participate,” he says. “Inevitably the answer is, We have to talk to the home office. The home office is not in New York, and they don’t understand the concept that this is a community thing.”
Managers of the national retailers often tell him they must obey rules about exactly what a store window can and cannot contain. The BID now even pays to wash the paint off at the end of the season. Even when he can get permission, Logue says, he often has to start from scratch the following year.
“The managers in the stores change every six months,” he explains.
Last year, Logue secured 90 windows for the contest—down from 250 at its peak—though some are multiple windows in the same store, and the contest has spread from its original core on 86th Street to the surrounding avenues.
“It’s one of the things that make Bay Ridge unique,” he says.
Logue grew up in the business. His father, John Logue Sr., began working at Hinsch’s in 1948, when Herman Hinsch bought the business from the Reichert family. In 1961, the elder Logue bought it, and his son took over 16 years ago. The ground floor of the building, constructed in 1914, has had only three tenants—the Reicherts, the Hinsches and now the Logues. The restaurant is popular on weekdays with senior citizens, many of whom come for lunch every single day, seeking both the food and the company. Weekends bring a younger crowd: families or teenagers drawn by the homemade ice cream, old-fashioned soda fountain and baskets of candy. But increasingly, a family-owned business in a building that has had just three tenants in 96 years is about as quaint as the curlicued letters in the vertical neon “Hinsch’s” sign outside.
Bay Ridge, at the southwest tip of Brooklyn, is a residential community with palatial houses along Colonial and Shore roads balanced by more modest homes inland. A hundred years ago, it was populated mainly by Northern European immigrants, who established businesses—cigar stores, pharmacies, movie house—along the ever widening corridor of what is now 86th Street.
Even in the 1980s and 1990s, neighborhood leaders say, when other parts of the city were racked by graffiti and crime, Bay Ridge remained relatively stable, with a strong, safe community that saw little turnover and little unrest. Its location along the N and the R subway lines, as well as its proximity to the Belt Parkway and the Verrazano-Narrows Bridge, established it as a shopping hub for residents from not just the area but all over southwest Brooklyn.
“You have such an incredible anchor with Century 21 on the block, you have the subway nearby, and you have this southern-Brooklyn population that, for them, the shopping in [Manhattan] is much less accessible,” says Matthew Giordano, Massey Knakal’s first vice president of sales. “Historically, it’s a very stable neighborhood that does produce a lot of people who want to stay there, because it’s a safe, wonderful place to live.”
So few of its longtime residents have moved out that the neighborhood is officially recognized as a Naturally Occurring Retirement Community, or NORC, a federal designation for neighborhoods with high concentrations of senior citizens.
“My father just sold his house. He was in it since 1962. He moved literally 40 feet,” Logue says. “The rest of the country moves every seven years. Not in Bay Ridge.”
Meanwhile, an influx of new residents have moved in: In the 1980s, Bay Ridge saw an increase in Italian, Greek, Syrian and Lebanese immigrants; in recent years, its good schools and comparatively modest housing prices have drawn Asians, Muslims and Latinos, many from nearby Sunset Park, as well as families from pricier neighborhoods like Park Slope.
“You get a little more for your money here,” says Josephine Beckmann, district manager for Community Board 10. “And I think it’s a great place to live and work and raise a family.”
The stability of Bay Ridge had an unintended consequence: It became attractive to national retail stores at a time when much of New York City was still largely off-limits. For decades, the only chain store on 86th Street was Woolworth’s; now the core strip between Fourth and Fifth avenues is an outdoor mini-mall, with familiar retail outlets including the Gap, Benetton, the Children’s Place, Aerosoles, Foot Locker, Payless Shoe Source, Nine West, Zales, Duane Reade and McDonald’s. Bank branches and cell phone stores fill in the smaller commercial spaces: Bank of America, Capital One, Citibank, HSBC, Chase, Amalgamated, AT&T, T-Mobile.
“You’re starting to see a lot of what you would call mom-and-pop clothing-type stores being replaced by chain stores,” says Beckmann. “I think it’s a positive. It certainly benefits the community because it gives people choice. Instead of traveling outside to malls, you have that right here in your neighborhood.”
The arrival of national chains in Bay Ridge opens a new chapter in the history of consumption in America and a new era for New York City’s economy.
The rise of chain stores in the U.S. in the 1950s, says Stacy Mitchell, was inextricably linked to Americans’ love affair with their cars.
“We have primarily built an auto-oriented environment over the past 40 years, and that’s an environment where national retailers really thrive. Think about driving down a road. What’s going to attract your attention is a well-known national brand, a big-box store, a giant building. Individual businesses have traditionally thrived where more people are on foot,” Mitchell says, adding that the trend accelerated during the late 1980s and early 1990s with the invention of the big-box store and consolidation of several chains. “The kind of environment we’ve created has really spawned the growth of these kinds of retail chains, and now they’re giant companies, and they have enormous amounts of power.”
But this auto-centered model exists primarily in the suburbs; for decades, cities were unattractive to the large chains. According to Sharon Zukin, a Brooklyn College sociology professor and author of Naked City: The Death and Life of Authentic Urban Places, chain stores were reluctant to open in cities because they couldn’t assemble enough land at a cheap enough price, traffic threatened on-time truck deliveries, politicians demanded concessions, labor unions and local residents were opposed, the stores’ management feared crime, and they didn’t think they would make enough of a profit. In New York, Zukin says, zoning was also an issue because big chains were blocked from opening outside certain manufacturing zones.
In the mid-1990s, things changed. New York began to lose its stigma, shedding its image as a morass of poverty and crime. Mayor Rudy Giuliani’s zoning changes eased the restrictions on big-box stores like Target and Home Depot. The culture shifted, and cities became more attractive. Wealthy people stopped migrating to the suburbs en masse; some remained in the city, and so did their buying power. Meanwhile, Mitchell says, the suburbs were becoming saturated, and the national chains were under pressure from shareholders to boost stock prices through constant expansion and growth.
“They’ve exhausted a lot of possibilities, and cities are the next frontier,” Mitchell says. “They’re also kind of the last stop, because they’re much more difficult places for them to do business.”
By the time most chain stores opened in New York City, they were so powerful and so successful that the challenges of doing business here were secondary to the opportunities the city offered. They could also afford to operate at a loss for extended periods. Even if they weren’t drawing enough customers to make a profit, Mitchell says, they drew enough to siphon the profits of the independents.
“If you think about a chain bookstore opening across the street from an independent bookstore, they don’t have to be the most popular of the two stores to win that fight. You can imagine a scenario in which the independent bookstore is still the preferred choice, but if the chain can peel off 30 percent, that’s enough to destroy your profit margin and put you in the red, and after a while you’ve got to close your doors,” Mitchell says. “Often that’s how they expand, with the expectation that a new store will operate at a loss for months. These are not startups coming into a city on a level playing field.”
And so it went on 86th Street, where Benetton and the Gap and the Children’s Place have outlasted Montecito Menswear, where a sign boasting outposts in Las Vegas and California is now surrounded by posters proclaiming the space “For Lease.” And Payless Shoe Source and Nine West outlived Trio Shoes, a store established in 1932 and run by two generations of the Fels family, in a space now occupied by a T-Mobile.
In 2007, Massey Knakal released the results of a survey concluding that 86th Street had the highest retail rents in Brooklyn, with commercial space renting at an average of $150 a square foot. Three years later, Giordano says, 86th Street’s small spaces can commonly rent for more than $100 a square foot—much reduced by the recession but still among the highest in the borough. One reason, Giordano says, is the concentration of the 86th Street strip: Most of the businesses are condensed between Fourth and Fifth avenues, while most commercial strips elsewhere encompass several blocks.
While the chain stores may have originally increased the luster of the street, raising its profile along with its prices, national stores now tend to be in a better position to negotiate lower rents with landlords because they are often more attractive to them, Giordano says.
“Time and again, you hear the story of somebody, a pizzeria or something, and in 2006 their lease is up, and the owner is tripling their rents,” he says. “A lot of times the national chains, because of the security of their revenue streams, will come in and use that as leverage to get lower rents. It wasn’t long ago that Starbucks would come in and say, ‘We’re Starbucks. You want us here. We’ll be here forever. We’re not some fly-by-night. If we’re across the street, and you end up with a mom-and-pop, who do you think is going to last in the long run?’ A lot of people will say the national chain.”
Rising property taxes are taking their toll on small businesses too. Last year, property taxes generated about $16 billion in revenue for the city, up from $8.5 billion in 2002. The increase may not have an impact on small business owners directly, but the costs are passed down to the business in the form of rising rents. What’s more, the higher property taxes have helped drive what some see as an increase in speculation—landlords who, facing rising costs, might prefer to take a risk on a national chain likely to renovate its space rather than just keep their heads above water with a loyal tenant that has fewer resources.
“Once, the small landlords wanted a good-paying tenant that was going to be there for decades. No more. … What we want are franchises or banks, and we don’t care if they go in and out, because every time they go in and out, guess what they do: They improve my capital. They increase my plumbing. They add wiring,” says Null. “I don’t care if you’ve been there 100 years, when your lease comes up, you are in trouble.”
During the economic boom times, space was at such a premium that many store owners reported being forced to pay so-called key money—tens of thousands of dollars in cash to landlords—before the property owners would even begin lease negotiations. This is partly why Null and a coalition of business owners approached City Councilman Robert Jackson about reviving the Small Business Survival Act, a bill introduced decades ago by former councilwoman Ruth Messinger to regulate the lease renewal process.
Jackson, meanwhile, was watching the mom-and-pops disappear from his own district. The Gruenebaum Bakery was a fixture on West 181st Street in Manhattan for 40 years, but four years ago, its lease was not renewed. (The storefront sat vacant until recently.) Across the street from the bakery was Sunny’s Card Shop, owned for 20 years by a Korean husband and wife who had to close because the landlord’s lease renewal offer was too steep, Jackson says.
“So our strategy was to try to get this bill passed before the end of the term, and considering the end of the term was an election year, it would put a lot of pressure on elected officials to support small business,” Jackson says.
At first, it seemed as if their strategy was working. The bill, which would have required a leaseholder and landlord who could not agree on renewal terms to see a mediator and be subject to binding arbitration, had at one point 36 signers, making it veto-proof. But Council Speaker Christine Quinn declined to bring it for a vote, saying a legal review indicated the bill could not stand up to a court challenge. Jackson disagreed, but the bill’s support evaporated after Quinn’s decision. Representatives for Quinn did not return calls or respond to e-mails seeking comment about the bill.
The bill is still technically alive, but Jackson says he is not pushing it.
“The timing has to be right,” he says. “I know that the mayor’s opposed to it, I know the real estate industry is opposed to it, and I know I differ with the speaker as far as the legal opinion. The timing may be right again, and it may be the last year of this term, when everybody’s running for re-election.”
Asked about the bill, Walsh says he’s met with small-business leaders on this issue, and his office now works with 18 law firms to offer pro bono services to store owners who say landlords have tried to force them to pay cash up front to renew their leases.
“I guess our message has been to try to educate the public—if something like this is taking place, use our consumer affairs office to report that,” Walsh says.
Small Business Services also works to help steer small-business owners towards loans—a particularly challenging task in an economic climate with enormous hostility to small-business lending. Yet even as loans from banks have precipitously dropped, bank branches have proliferated, frequently displacing the mom-and-pop stores. Between Fourth and Fifth avenues alone, 86th Street has at least seven bank branches.
“We have gotten complaints that a lot of the businesses that were closing were being replaced by banks,” Beckmann says. “I’m sure some people are happy with the banks. It’s just that you used to have more of a variety of shopping.”
Though some lower-income neighborhoods in New York City remain underbanked, with few options for residents other than check-cashing stores, much of the city over the past decade has been flooded with branches. According to data from the FDIC, the number of bank branches in the five boroughs has risen 41 percent since 1999. Brooklyn alone has added 103 bank branches since 1999; 27 just since 2007.
Bank branches—which will often not only pay more rent, but will also pay for costly capital improvements to the space they’re renting—are yet another factor driving up costs for small-business owners, advocates say.
Joanne Podell, executive director of retail services for the real estate firm Cushman & Wakefield, says national retailers have not stopped moving into New York City since the economic downturn began, and they are well aware of their continued value to landlords.
“When you have a national retailer, you know that they have the infrastructure to maintain the store properly, to keep it well stocked, to have the right amount of sales associates, management, to make sure they operate well. Landlords like that,” Podell says. “Everybody walks into a store—if it’s clean, if it’s well air-conditioned, everything is marked clearly, you feel better about it. You walk into a little local store, and if they don’t have the ability to market in this way, you don’t want to shop there.”
Chains may keep stores clean and orderly inside, but as 86th Street has evolved from neighborhood to national shops, the cleanliness of the street outside has deteriorated.
It was in 2000 that Logue became alarmed by the change on the once pristinely kept street, where he now saw dirt, graffiti and even drug dealing. He and some others formed the 86th Street BID, persuading property owners to pony up their share of the BID’s $210,000 budget. The BID would do formally what it was once easy to do informally—clean the street and provide holiday decoration and lighting—things that were falling by the wayside as the street’s character changed.
“Twenty-five years ago, you knew every shopkeeper. Every shopkeeper started each day sweeping the sidewalk,” Logue says. “There was a certain amount of pride. That’s lost when the regional and national chains come in. If you’re the manager of a chain, a clean sidewalk doesn’t change the numbers on the register.”
Now the BID spends upwards of half its budget just on custodial services.
“We’ve got three guys, in eight-hour shifts, sweeping 86th Street,” he says. “Twenty-five years ago, it was clean. Ten years ago, it wasn’t clean. But it’s clean now.”
