Brooklyn's Retail Market Is Eyeing A Quick, More Inclusive Recovery

Like much of the city, the Brooklyn retail sector has been pummeled by the events of the last year. But many businesses hope a push toward smaller, niche offerings and heightened support for minority-owned businesses will be their saving grace — as long as their landlords get on board.

“Small businesses have had a very, very hard time,” said Lori Raphael, a senior vice president at the Brooklyn Chamber of Commerce, adding that federal aid is starting to filter through and help. “That said, we are starting to see the light at the end of the tunnel.”

For Jamila McGill, the co-founder of Brooklyn Tea, an artisanal tea room on Nostrand Avenue in Flatbush, that light is already shining. She was having sleepless nights early in the coronavirus pandemic over the future of her business. But in the summer, as the country grappled with racism after the protests sparked by George Floyd’s murder, television producer Shonda Rimes gave the store a shoutout on Twitter.

Soon after, Beyoncé named Brooklyn Tea on her curated list of Black-owned businesses, and orders exploded.

“Those two women changed the entirety of our business, the total trajectory of where we were going,” McGill said. “If it wasn't for those June shoutouts, those features, we'd be having a different conversation right now.”

She and her fiance and co-founder haven't adapted their lease at all, she said, paying the same as they always have. And as they had originally begun as an online company, they were able to pivot easily through the crisis.

The local community pulled together to support each other, she said, offering cross-promotions and help where needed. Still, not all her peers had such good fortune.

“If you know anything about landlord relationships in New York, they can be pretty tough and pretty inflexible,” she said. “And some of that has already taken root, we have some friends in business whose leases were up, and their landlord asked for more in the middle of a pandemic, so they couldn't stay.”

CBRE data indicates that for available retail spaces in Manhattan, the average asking rent is down 20% year-over-year. The company doesn’t track retail for Brooklyn, but Peter Schubert, a managing director for commercial leasing at Brooklyn-focused brokerage TerraCRG, estimates rents in the borough have come down in the 15% to 25% range.

These days, retail deals signed in the borough could include a 50% reduction in rent on the first year as an incentive, he said, though he does have a sense that the market is beginning to stabilize. All and all, it is a circumstance that could allow more entrepreneurial brands and stores to flourish.

“Landlords have had to be more open-minded with the concept, the use and the credit,” he said. “The availability rate is very high right now, in some of these neighborhoods … it's got to be right at that kind of high teens, pushing 20% rate.”

Despite the challenges, Brooklyn’s retail recovery may be swifter than Manhattan's, Schubert said. While Manhattan saw a mass exodus of residents during the pandemic, more Brooklynites stayed, he said, continuing to shop local as much as they could. The tenant makeup in Brooklyn was already different than that in Manhattan, where many of the high-end shopping destinations that were already suffering have been further hobbled by the pandemic.

But as the city moves into the recovery phase of the crisis, a reckoning could be soon to come — as the patience of landlords who have reached agreements with tenants begins to wear thin and the moratorium on commercial evictions is eventually lifted.

“That conversation is shifting. We know the market is getting better, and [landlords are saying] ‘now you can go back to business,’” Schubert said. “A lot of those tenants have been very hurt financially … We don't know how many of them are going to be able to hang on, and how many are going to stay.”

At the end of 2020, roughly 33% of all Brooklyn businesses owed some back rent, according to figures from the Brooklyn Chamber of Commerce. Nearly half of all businesses didn't receive a rent concession, and of those that did, one-fifth of tenants received rent reductions or deferrals were the most common.

Each submarket has been affected differently. Retail in Downtown Brooklyn, where much of the office buildings are situated, suffered significantly. Foot traffic along Fulton Street has only returned to 50% to 60% of what it was before the pandemic, according to Regina Myer, the president of the Downtown Brooklyn Partnership.

And even as the health crisis subsides, retail is expected to continue to be reshaped. Nationally, about 1 in every 11 stores will close by 2026, according to a UBS analysis. 

But Shelley Worrell, the founder of caribBeing, a Brooklyn-based business that aims to amplify Caribbean talent and brands, who runs a retail pop-up in a shipping container, said that many retailers in Brooklyn are in step with what consumers now want.

“Part of it is this movement towards the support of Black-owned businesses, but also people being more intentional about what they consume,” she said, adding that while the container has only been operational in Brooklyn over the last few years, she has recently been approached by RXR Realty and The Prusik Group about forming partnerships.

“We only work with Caribbean and Latinx brands, so it's very niche and we tend to do things in a smaller footprint,” Worrell said. “We started small and we intentionally stayed small and that has served us really well throughout the pandemic.”

The focus on the careful selection of retailers and brands is on the mind of Michael Pintchik, who owns around 65 mixed-use properties, mainly around the Barclays Center area.

“Many of them are contiguous, so we sort of have the unique ability to guide the look and feel of our little neighborhood,” he said.

Some of his retail tenants are still not paying rent, and when the commercial moratorium lifts, he said there will be a moment of truth for who can continue and who cannot.

“We are trying really hard to sort of nurse them through this tough time," he said. But I can’t say there isn’t a time where I will have to say, ‘It’s now or never.'”

Ultimately, he said he wants to keep the niche, community feeling of Brooklyn as he continues to fill up retail space.

"We've had both Popeyes and McDonald's after us left and right, looking to pick one of our spaces, and we would sure love the McDonald's credit,” he said. “But it won't inure to the benefit of what we're trying to build in our little community here.”