by Neil A. Dolgin
Since the beginning of the COVID-19 outbreak eighteen months ago, New Yorkers have become all too familiar with empty office buildings and store fronts on practically every block. It’s also true that the economic fallout has heightened some already-existing trends as companies and retailers continue to grapple with how to best utilize their existing space and adapt to the new normal.
But reports of the commercial real estate (CRE) industry’s demise have been greatly exaggerated. To the contrary, CRE firms and brokers can rest assured that New York City is coming back, and there are still plenty of opportunities if they are willing to adapt accordingly to changes in the market. As I mentioned in my last post back in May, small is the new premium, although out of necessity and buoyed by the shift towards e-commerce, many retailers were already testing the waters of smaller brick and mortar operations well before the pandemic brought New York and the rest of the nation to a grinding halt.
Of course, COVID-19 has only accelerated this on a much larger scale. In recent months, we have also seen a noticeable uptick in the demand for smaller spaces throughout the industrial, retail and office locations KDA represents, particularly those in the 2,500 to 7,000 square foot range. That’s where we’ve been seeing the most activity and the biggest turnarounds of late – from those new and existing clients who have been coming out of the pandemic and going into smaller businesses, whether it’s an offshoot from larger companies that may have closed down, taking a step back to reevaluate how to do more with less, or entrepreneurs just starting out on their own.
In fact, it is this entrepreneurial spirit that New York has always been built on. So from our vantage point here at KDA where we take great pride in going the extra mile to understand and meet the needs of our customers, I am pleased to report that it is indeed alive and well. In response to increased demand for personal beauty and wellness services after being cooped up during the pandemic, we are seeing a surge in new hair and nail salons, massage parlors, chiropractic offices and specialty clothing boutiques that are opening up in retail centers throughout the outer boroughs of New York, as well as in parts of Long Island, New Jersey and Connecticut. One of the reasons for this perhaps in New York is that it is more difficult to find new land for development which in turn, necessitates reimagining what you have which was the subject of my April post.
Another area where we have seen a lot of robust activity in recent months has been on the restaurant side, as well as among specialty food and beverage retailers. One example of this is at our property at 87 Richardson Street in Brooklyn, formerly the site of a 75-year-old warehouse, where the anchor tenant Talea Beer opened its flagship microbrewery and taproom this past March.
In the less than six months since opening, not only has Talea – which is named for its co-founders Tara Hankinson and LeAnne Darland – gained a following for its unique selection of candy-flavored and inspired specialty beers, they also offer light food such as pita and humus that will likely continue to be a major draw as the city’s outdoor dining policies remain in place for the foreseeable future.
Meanwhile, Amy’s Bread – the nationally renowned bakery and bread retailer whose KDA-owned headquarters are located in Long Island City – has undergone a resurgence since the beginning of the year, part of which founder and president Amy Scherber attributes to an adjustment in rent we gave them during the height of the pandemic.
Commenting for this article, she said: “We have been working with Kalmon Dolgin since 2011 and they were one of the ways that we really survived after demand plunged and sales were 30% of what they had been the year before. Especially in the beginning, Kalmon Dolgin was really helpful to us so that we could get through the roughest period and make a comeback.”
On the office side, we haven’t yet seen quite as much activity as companies both large and small continue to grapple with how to safely bring employees back at pre-pandemic capacity, along with addressing any building modifications that may need to be made. As building owners, these are still questions that we are trying to determine, and I believe that we are going to see an industry in and of itself where interior design specialists are going to be reconfiguring spaces with permanent social distancing measures in place, especially in doctor’s offices and other medical facilities.
Other factors affecting the industry locally include the upcoming mayoral election, as well as the uncertain impact of Local Law 97, which places carbon caps on most buildings larger than 25,000 square feet beginning in 2024. While owners are just recovering from losses in revenue they sustained from Covid-19, many are now facing the considerable costs of compliance with Local Law 97. So there will be additional stresses on commercial real estate in New York City. Nevertheless, I remain optimistic about the future having survived multiple economic market downturns in the past. As always, I’ll keep you updated on what I’m seeing and if you have any questions as a building owner or an investor, email me.
Neil A. Dolgin is co-president of Kalmon Dolgin Affiliates. Founded in 1904, Kalmon Dolgin Affiliates (KDA) has grown into one of the New York metropolitan region’s leading commercial and industrial real estate firms. Kalmon Dolgin Affiliates specialize in all aspects of real estate services for developing, managing, selling, leasing and marketing commercial and industrial property. KDA’s highly-trained professional brokers offer clients a practical, street-wise approach to commercial and industrial real estate brokerage, leasing and sales, supported by the latest in real estate marketing, management and research technology.