Retailers Rethink Pandemic-Battered Manhattan

In the heart of Manhattan’s garment district, a once-busy Starbucks on a corner of Eighth Avenue and 39th Street sits empty. Just down the block, a Dos Toros Taqueria that opened just three years ago is now closed. And Wok to Walk, which once served steaming containers of noodles mixed with chicken and vegetables to a bustling lunch crowd, is also shuttered.

While the Delta variant of the coronavirus has again delayed plans by many companies to bring employees back to offices en masse, workers who have been trickling into Midtown are discovering that many of their favorite haunts for a quick cup of coffee and a muffin in the morning or sandwich or salad at lunchtime have disappeared. A number of those that are open are operating at reduced hours or with limited menus.

With the pandemic keeping millions of New York City office employees home for the past year, restaurants, coffee shops, apparel retailers and others struggled to stay afloat.

By the end of 2020, the number of chain stores in Manhattan — everything from drugstores to clothing retailers to restaurants — had fallen by more than 17 percent from 2019, according to the Center for an Urban Future, a nonprofit research and policy organization.

Across Manhattan, the number of available ground-floor stores, normally the domain of busy restaurants and clothing stores, has soared. A quarter of the ground-floor storefronts in Lower Manhattan are available for rent, while about a third are available in Herald Square, according to a report by the real estate firm Cushman & Wakefield.

Starbucks has permanently closed 44 outlets in Manhattan since March of last year. Pret a Manger has reopened only half of the 60 locations it had in New York City before the pandemic. Numerous delicatessens, independent restaurants and smaller local chains have gone dark.

“Midtown clearly has been the hardest hit of any of the areas of Manhattan,” said Jeffrey Roseman, a veteran retail real estate broker with Newmark. “If you think of other office-centric areas, whether all the way downtown or Flatiron or Hudson Yards, there is a lot of residential surrounding those areas that helped sustain those markets. Midtown, for the most part, is a one-trick pony.

“It’s mostly offices and hotels, which also took a hit from the downturn in tourism.”

The turmoil has reached farther downtown, though. Last week, the luxury furniture retailer ABC Carpet & Home — whose flagship store has been a fixture of the Union Square area — filed for bankruptcy protection, in part because of “a mass exodus of current and prospective customers leaving the city.”

But in a city where one person’s downturn is someone else’s opportunity, some restaurant chains are taking advantage of the record-low retail rents to set up shop or expand their presence.

In the second quarter, food and beverage companies signed 23 new leases in Manhattan, leading apparel retailers, which signed 10, according to the commercial real estate services firm CBRE.

Shake Shack and Popeyes Louisiana Kitchen were among those signing new rental agreements this year. So was the burger chain Sonic, which signed a lease for its first Manhattan outpost, replacing a Pax Wholesome Foods location in Midtown. The Philippines-based chicken joint Jollibee, which enjoys a committed following, plans to open a massive flagship restaurant in Times Square.

Still, with so much uncertainty about when employees may fully return to Midtown offices, some companies are proceeding carefully. The coffee shop Bluestone Lane had plans to expand aggressively into Manhattan before the pandemic and is still considering locations in Midtown. But it has now turned its focus to opening in more residential neighborhoods like Battery Park City, Hudson Yards and TriBeCa.

“We intentionally selected urban residential areas for our new cafes so we are not dependent on our locals returning to a physical office space, and are well positioned for the future of hybrid work,” Nick Stone, the founder and chief executive of Bluestone Lane, said in an emailed statement.

And some chain restaurants that already have reopened in Midtown are altering their strategies to address what they believe are the changing needs of customers in a post-Covid world.

On a recent weekday, a handful of customers were nibbling on salads and sandwiches at the Bryant Park location of Le Pain Quotidien. The long, communal tables that once dominated the front of the restaurant are gone for now, while refrigerated cases for a selection of grab-and-go drinks, salads and sandwiches will be expanded next year as part of a remodeling. A new app to preorder and pick up food became available in May.

While the new technologies work for some customers, others long for the past.

“We used QR codes for guests to look at the menu as we tried to limit the contact of surfaces, but the majority of our guests want to hold a real menu,” said Stephen Smittle, the senior vice president of operations for Le Pain Quotidien. “They very much want to feel normal. They want a server. They want to hold a cup of coffee, not a paper cup.”

Struggling before the pandemic, Le Pain Quotidien filed for bankruptcy in May 2020. It was acquired by Aurify Brands, which has since reopened many of the Le Pain Quotidien locations around the city, including several in Midtown.

“Our thinking is that Midtown New York will come back to a level that might not be 100 percent prepandemic, but based upon information we have gathered, I do believe that Midtown is going to come back to a prominent level,” Mr. Smittle said.

For Starbucks, one of the big lessons from the pandemic was that customers liked ordering their drinks online and then quickly picking them up at stores or drive-throughs. Starbucks had started to offer that even before the pandemic, opening a pickup location in Midtown’s Pennsylvania Plaza in late 2019.

Since early 2020, Starbucks has permanently closed 44 of its 235 locations in Manhattan. But it is adding mobile pickup areas in many stores and adding more pickup-only locations. The company says it expects to have net new store growth in Manhattan in the next few years.

Before the pandemic, Starbucks operated three stores around the Columbus Circle area. It closed them and this year opened one large restaurant. Now runners from Central Park pick up their preordered drinks from a mobile counter and head out again, while other customers stand in line to place their orders and can sit at nearby tables.

“We were going to build the concept out and evolve over time,” said John Culver, the president of North America and chief operating officer for Starbucks. “What we’ve done is taken the opportunity that the pandemic has presented and accelerated the transformation of our portfolio of stores. Consumer behaviors during the pandemic have accelerated at levels that no one expected.”