Shops and eateries throughout the city’s subway system are getting an extra rent reprieve as many struggle to return to prepandemic profits.
Temporary MTA rent adjustments put in place in October 2020 will last through the end of 2023, instead of expiring this month, as previously planned. The policy applies to businesses throughout the suburban train system, too.
The rent adjustment program limits retail tenants’ rent to 20% of an agreed-upon rate or 10% of a shop’s gross sales — whichever is higher.
Of the MTA’s 171 retail tenants, 78 currently have a temporary rent adjustment agreement with the agency.
“Jumping from 20% to 100% [of rent due] will likely result in increased tenant defaults and arrears, placing the MTA in the position of defaulting and terminating tenancies and incurring untold legal expenses,” the MTA’s real estate division said in an assessment written in February.
Had the policy been allowed to expire in April, MTA officials said, “many tenants [would] remain unable to pay the unadjusted lease rent.”
Retail woes on the transit system aren’t new. In 2019, the agency told the Daily News that four in 10 of the subway system’s retail spaces were empty or shuttered.
Still, retail brought in $80 million in revenue each year to the cash-strapped transit agency before the COVID outbreak.
But as of February, retail brought in less than half the rent revenue the MTA got in 2020, according to testimony from MTA head of real estate David Florio.
Agency data shows a slow but steady return of riders to the subway system, but retail is not recovering at the same rate.
“[A] retail sales analysis of existing tenants across all three railroads [Metro-North, Long Island Rail Road and the NYC Transit subway] … indicates a lagging relationship between the return of ridership levels and the recovery of tenant sales figures,” the MTA said in a February report.
Of the LIRR’s 24 retail tenants, 10 are currently paying pandemic-adjusted rents, an MTA spokesman said. On Metro North, 15 of 27 retailers are paying reduced rents, and in the subway system, 20 of 50 tenants are paying reduced rents.
In Grand Central Terminal, more than 30 of the terminal’s 70 vendors are paying less than prepandemic rents.
The MTA’s most recent data shows a $1.3 million loss in expected retail and advertising revenue for Grand Central Terminal alone.
Some 180 feet below Grand Central, the pandemic has also waylaid the agency’s most recent effort at a major retail expansion — the empty new shops lining the new concourse at Grand Central Madison.
“We started to do a procurement for the retail that would be in the Grand Central Madison area in the middle of COVID,” MTA Chair Janno Lieber told reporters Wednesday. “Basically all the retail operators said, ‘We have no idea what retail is going to be like as we sit here in the middle of the COVID pandemic. We’re not taking on new projects.'”
The MTA is looking for a single company to take over the Grand Central Madison space and handle the work of leasing retail locations out to vendors, Florio told Commercial Observer last week.
“We would rather have a master tenant to have one vision for the entire north-to-south corridor and curated appropriately by people who know how to do that,” he was quoted as saying.
Such an arrangement has been used by the MTA previously — the retail in Manhattan’s Fulton St. subway station, for one, is sublet through Australian shopping mall giant Westfield.
For now, the agency is still monitoring foot traffic at the new station and engaging in “informal talks” with prospective retailers, said an MTA spokesman.
There are tentative signs of retail’s return.
The MTA board approved a 10-year lease at Coney Island’s Stillwell Ave. subway station for a Rita’s Frozen Custard franchise last week. The first year’s $32,500 rent for a 650-square-foot space was unadjusted and “equal to the fair market rental value,” according to agency documents.
And an East Village stalwart, the Ukrainian restaurant Veselka, has signed a three-year lease to open a location at Grand Central Terminal — partly because of the promise of LIRR foot traffic.
“We took a look at a number of transit spots around the city — Grand Central just kind of felt right,” Justin Birchard, the restaurant’s development director, told The News.
“They were adding the LIRR into the station. To us, that felt like another group of customers would be coming through,” Birchard said. “You get a great captive audience in a transit hub. It seemed like a no-brainer to me.”
