While Wall Street panic buys stocks again, on hopes Washington can pass the next round of much-needed economic stimulus, the broader commercial real estate market continues to implode and nowhere more so than the epicenter in New York City, where nearly 6,000 business closures, has resulted in a 40% eruption in bankruptcy filings across business districts of all five boroughs this year, reported Bloomberg.
Al Togut, a bankruptcy lawyer who has handled insolvencies for small firms to mega-corporations, said, “by late fall, there will be an avalanche of bankruptcies … When the cold weather comes, that’s when we’ll start to see a surge in bankruptcies in New York City.”
The coming wave of business closings, as explained in “Old Man Winter To Plunge Restaurants Into Further Chaos,” is set to crush eateries and other small businesses in NYC ahead of the holiday season.
“It’s a crisis, and we need to act—our economy can’t recover without saving small businesses,” said NYC Comptroller Scott Stringer, a candidate in next year’s mayoral election.
“When they close, we don’t just lose our beloved Main Street businesses. We lose jobs, tax revenue and the economic backbone of our city,” Stringer said.
The Partnership for New York City, a nonprofit membership organization of NYC’s top businesses, warned the virus pandemic could permanently close a third of the 230,000 businesses across all five boroughs.
Bankruptcy filings in the region have skyrocketed since the middle of March, when the state of New York reported its first deaths from Covid-19 and Governor Andrew Cuomo closed all nonessential businesses. There were 610 filings in the Southern and Eastern Districts of New York from March 16 to Sept. 27, according to court records. That’s a 40 percent jump from the same period in 2019 and the most by far for any year since the financial crisis. The districts include some nearby counties.
Almost 6,000 New York City businesses closed from March 1 to Sept. 11, according to Yelp, the website of user reviews. Over 4,000 of those closed permanently.
The carnage has been demoralizing after decades in which the city fought back from the brink of bankruptcy, the scourges of crack cocaine and violent crime, terrorist attacks and recession. The pandemic hit as the city had achieved record high employment and low crime. – Bloomberg
The effects of the pandemic are still being felt in late September, as only 15% of NYC’s 1.2 million office workers had returned, according to the Partnership for New York City. None of this suggests NYC’s recovery will be “V” shaped.
“Retail and real estate will continue to decline in New York until you can reignite the office traffic,” warned Joseph Malfitano, who advised Brooks Brothers and the parent company of Ann Taylor in their bankruptcies earlier this year.
Vin McCann, a restaurant consultant, said once temperatures dip in the city, the next wave of restaurant closures will be seen.
“Once you hit below 60 degrees… I would bet you that between 25 and 50 percent of restaurants in New York City will not come back,” said McCann.
The city’s Department of Small Business Services received about 35,000 requests from businesses since June and has allocated nearly 4,000 grants, totaling about $80 million, to business owners struggling to survive the virus-induced economic downturn.
“A third of our small businesses could be closed if we don’t have a strong recovery,” said Jonnel Doris, the department’s commissioner. “The fate of small businesses will determine the fate of the city.”
In early September, NYC restaurants banded together and sued the state for $2 billion in damages and allege that the government is violating the constitutional rights of the owners of more than 150,000 NYC restaurants.
This is particularly troubling, considering the spillover of closures is beginning to pressure the commercial real estate market in the city.
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