Wed, Dec 15, 2010
By Manuel Rueda
The Bagel Store in Williamsburg is a popular spot with locals and tourists seeking a quick breakfast or lunch. Asides from the regular fare of poppy seed bagels and sliced meat sandwiches, the nine year old bakery offers exotic cream cheese flavors like French vanilla, jalapeno and eggnog. There are bagels made with pumpkin dough, coconut or peanut butter. And as the holidays approach, there is a Christmas bagel on sale, that owner Scott Rossillo describes as a combination between eggnog and fruitcake.
Located on the corner of Bedford Avenue and Metropolitan Avenue, The Bagel Store attracts a steady flow of customers on weekends and goes through more than 1,000 pounds of dough per week.
But Rossillo reckons this will be the last Christmas for The Bagel Store at its current location. “The rent is so monolithically grand that we can’t afford to be here anymore” he says. Rossillo currently pays $7,400 per month for the 1,450 square foot space. But as luxury condos sprout in Williamsburg and chain stores move into the neighborhood and push up the value of real estate, the landlord has decided to raise Rossillo’s rent to $14,500, an amount the 44 year old Baker describes as highway robbery. “If I were paying that right now” he says “I would not be able to survive the season.”
There are currently no regulations in New York City, determining how much landlords can charge for commercial space or how much they can raise the rent on their tenants from one year to the next. In Williamsburg and other up and coming neighborhoods however, the market is heating up so fast, that some small business advocates are calling on the city government to impose a controversial rent arbitration law, the Small Business Survival Act.
The bill would enable entrepreneurs like Rossillo to seek arbitration, in cases where landlords attempt to raise commercial leases by more than three percent. An arbitration agency appointed by the city government would then make a legally binding decision on rent value that falls somewhere in between the tenants and the landlords desires.
Late last year Council Speaker Christine Quinn refused to allow a vote on this proposal, saying that the law went against constitutional guarantees on property rights. Mayor Michael Bloomberg, also said he opposed rent arbitration.
But Councilman Robert Jackson got 33 of the city’s 51 council members to back last year’s bill. And in a meeting with attorneys making a legal case for the bill in November, Jackson said he would bring a reformed version of rent arbitration to the city council in 2011, even if Quinn and Mayor Bloomberg continue to oppose it.
Those who have followed the city’s efforts to impose rent controls for years however, say it is unlikely the bill will pass any time soon.
“Just cause they’re co-sponsoring the bill, doesn’t mean they’ll vote for it. They’re co-sponsors because there’s no penalty for that, because they know the bill is not going anywhere” said CUNY Business Journalism Professor Greg David, a longtime opponent of commercial rent controls.
But some advocates of rent arbitration are hopingthat the council gets something done soon. “It’s a crisis out there” says Jack Sagan a wholesale executive who has testified in favor of the proposal. Sagan oversees Jetro Wholesale’s merchandising for New York and runs business workshops for groups of 35 to 50 bodegas in each borough. Every week he gets two to three calls from bodega owners saying that high rents are threatening their business.
He is one of several business leaders who sees a direct correlation between increasing rents in the city and the closure of small businesses.
In hearings and at meetings with council members, the USA Latin Chamber of Commerce points out to a survey of 937 Latino-owned small businesses it conducted in 2009 in which 53 percent of respondents said they were at risk of closing. Three fourths of those who said they were in trouble said that high rents were their main concern.
The New York Small Business Congress, a nonprofit based in Queens, has tabulated the number of warrants issued by the City Court for the eviction of commercial premises over the past 25 years. There were 3,575 evictions in 1986. In 2009, there were 7,582.
Opponents of arbitration however, say that the failure of many of these businesses is not due to high rents, but arises from other factors like the lack of credit, a slow economy and even badly conceived business plans. Last year they testified against the business survival bill at a hearing held by the City Council’s Small Business Committee.
“We are concerned with the amount of personnel and administrative resources that would be needed to implement the bill” said Department of Small Business Services First Commissioner Andrew Schwartz, adding that even if tenants covered arbitration costs, “It would be unfortunate for a tenant to be left with rental terms she still will not accept and receive a substantial bill for mediation and arbitration services. “
Opponents of rent arbitration fear that a measure that so strictly controls what owners can charge for renting their properties, would discourage developers from investing in neighborhoods were urban renewal is necessary.
Greg David, the CUNY Business Journalism Professor said the law would also work against new startups or any other companies attempting to find floor space in New York, because by helping existing businesses to secure their spaces, it would make it harder for new and possibly more profitable businesses to find spaces in different parts of the city. “This is not about helping small business” he told the Brooklyn Ink. ”It is about protecting existing small businesses, primarily retailers, and penalizing new businesses, primarily start-ups.”
In many New York neighborhoods however some local residents say they are prepared to defend existing small businesses from outside competition, especially if it comes in the form of national chain stores.
Take Williamsburg where the recent arrival of a Duane Read on Bedford avenue sparked a boycott Duane Read Facebook page, that gained 800 members in two weeks. “Let Duane Reade know that we won’t tolerate corporate chains coming into the neighborhood and turning it into a strip mall.” wrotethe page administrator.
With rumors circulating that other chain stores will follow Duane Read’s footsteps, local business owners fear that landlords will continue to hike up their rents.
“Its very uncertain around here cause of all these chains” said Jonas Kyle from Spoonbill, an independent bookstore on Bedford and North 5th street. “We’re ok for this year, but who knows what will happen next year.”
Duane Reade could soon be followed by Starbucks, says Scott Rossillo from The Bagel Store. Rossillo says his landlord told him that if he doesn’t pay $14,500 a month when his current $7,400 a month lease runs out next year, the coffee chain was willing to do it.
And as developers attract more wealthy residents to the neighborhood with luxury condos like the 30 story high Northside Piers and renovated lofts with private gyms and doorman services, local real estate agents say that the prices for commercial rents will continue to rise in what was once a working class neighborhood.
“It is inevitable for national chains to enter the neighborhood.” Says Herbert Kliegerman, a real estate agent who has worked in Brooklyn for more than 40 years. “Landlords are looking to maximize earnings on their real estate.”
Small business advocates say that local businesses on Bedford Avenue and elsewhere would find it easier to stay at their current locations and fend off competition for rental space from chain stores, if the city council passed rent arbitration laws.
But for CUNY professor Greg David, the city should not protect small businesses at the expense of national chains. “Why should we choose one sort of store over another? “ he said. “The only reason those stores survive and prosper is that people want to shop in them.”