The story of skyrocketing rents has two components: residential and commercial.
My New York neighborhood, the Upper West Side, features fairly stable residential rents, but commercial rents seem to have been soaring. This has caused the familiar angst over the loss of neighborhood businesses to the ubiquitous bank branches and drug stores.
But today even chains are getting priced out. The quintessential marker of gentrification, Starbucks, was recently forced to relocate in my neighborhood. They vacated their stores at 67th and Columbus when the landlord raised their rent to $140,550/month.
You’ve got to sell a lot of grande’s to cover that kind of rent check. How many businesses can realistically survive at this location? (Maybe none – it’s still vacant).
A block up the street, another store helps illustrate the forces sending retail rents through the roof. It’s the Maille “mustard boutique” at 68th and Columbus pictured above.
Maille is a supermarket brand of dijon mustard. It’s a product of Unilever, the Anglo-Dutch food and consumer products giant. You may not know Unilever, but you know their brands, including Hellman’s, Dove, Lipton, and even Ben and Jerry’s.
This particular location provides mustard tastings, and sells dijon in a variety of flavors not typically available. I believe they also have some vinegars. I was once needed some dijon and purchased a jar of their regular flavor for $7 – which is $3 more it sells for at the grocery store a few blocks away. They apparently charge as much as $99 for a jar of black truffle mustard.
I don’t know what their monthly rent is. It’s a smaller, mid-block store than the former Starbucks location. Based on square footage equivalents, the rent would be somewhere around $30,000 a month.
Can you really sell enough mustard to cover that kind of rent (to say nothing of the “mustard sommelier” and other employees they have on staff and all the other costs of operations)? I see people in the store, but it’s never crowded. And it’s rare to see someone walking out with a shopping bag.
It strikes me as dubious that this store could even break even, much less turn a profit that would earn the required return on invested capital.
But ultimately it doesn’t matter if this store makes money or not. The rent isn’t even a rounding error to Unilever and can easily be justified as a marketing expense.
If there’s one thing it’s not hard to find in this world, it’s gourmet mustard. This neighborhood needs a corporate mustard showroom like it needs a hole in the head.
But we have one anyway. And there’s actually a second location in the Flatiron. These are the only Maille stores in the US, save for what appears to be a popup going into a Connecticut mall.
You can tell a lot of amazing “only in New York” stories. But this is an example of a bad one. These showrooms may be exclusive to the city, but they put upward pressure on retail rents and make it harder for actual neighborhood serving businesses to make it. (This location was closed over the summer for a sidewalk replacement project and I was hopeful it wouldn’t reopen – alas, it was to be denied).
Multiply two Maille mustard showrooms by all the other major corporations who use NYC as a branding platform, and it’s easy to get a sense as to why retail rents are so high in Manhattan.