Hard Times on Newbury St.

Stores along the famed street struggle to survive

On a sunny Friday morning this past April 7, a few tourists and locals traveling in late for work weaved up and down the renowned outdoor shopping area, Newbury Street in the heart of Boston.

But, if one were to take a closer look, many of the storefronts laid bare, with “for lease” signs or construction tape boarding up the windows. On that particular Friday, about 40 storefronts of close to 300 total were empty, taking away some of the charm that makes Newbury Street, well, Newbury Street.

A number of retail stores along Newbury Street have been closing for various reasons. However, it seems like property values are driving the trend.

Because mortgage rates are at historically lower rates it has been one of the factors driving up property values.

Commercial property owners are faced with a commercial tax rate of $25.37 per $1,000 of assessed valuation. Currently, commercial property owners are armed with higher assessed property values and favorable mortgage rates.

The average rate on the 30-year fixed-rate mortgage rate for the Boston area moved downward to

4.14 percent, according to Bank rate’s national survey of large lenders.

At 164 Newbury Street, which is home to one of Lauren’s Nail Salons and clothing store Cynthia Rowley, the property is assessed at $4,309,500 for this year. Ten years ago, this same property was assessed at $1,806,000. This year property owners had to pay $109,332 in real-estate taxes. The rents reflect the assessed values. According to MLS (Multiple Listing Service), this property is going for $7,000 per month.

At 331 Newbury Street, which was home to Kixters shoe store, the property is assessed at $3,591,000 for this year. Ten years ago, this property was assessed at $1,441,000. This year the property owners had to pay $91,103 in real-estate taxes. According to MLS, this property is going for $7,750 per month.

A number of factors are leading many small businesses and even large retail stores to close up shop not just here in Boston but around the country.

This past March, Hedgeye Risk Management an independent investment research business, reported that retail bankruptcies were at higher levels than what was observed during the 2008 financial crisis, showing a big shift is happening with brick and mortar shops.

Big box stores like Macy’s, Lord & Taylor, and Sears continue to close stores while high-profile chains like, Radio Shack and BCBG Max Azria, and Payless have filed for bankruptcy, according to Bisnow.

One key factor in deciding to close shops, some stores say, is the increase of e-commerce, but there are many factors pressuring stores to close.

Along Newbury Street influences include an increase in demand for online e-commerce, higher rents, higher taxes, and even higher on-street parking rates.

“Newbury Street is experiencing it just like every other retail area,” said Michele Messino of the Newbury Street League. “The rent on Newbury Street has gone sky high, which means the commercial real-estate tax has gone sky high and you add that to the triple parking meter rate – the vacancy rate is going up on Newbury Street.”

She continued, “It hasn’t been this high in a long time.”

Beginning in January, the City of Boston began a one-year pilot program to study the relation- ship between parking price and demand. In the Back Bay, this meant raising the parking meter price from the standard $1.25 an hour to $3.75 an hour.

Although spots have opened up along Newbury Street, Messino said, it has led people to go elsewhere.

“This winter was so mild but the stores didn’t capture any of that because of the increase in parking rate,” said Messino.

The start of this pilot program began during some of the worst months of the year for retail, during the slow, colder months that follow the holiday season.

“After the holiday season, during the first quarter nobody is walking that stretch,” said Michael Jammen of UrbanMeritage that has a number of properties along Newbury Street. “It’s the most difficult time, especially in an out- door experience.”

Although these may have con- tributed to some stores’ closures, Jammen said that as the spring arrives there is going to be a lot more stores opening shop along Newbury Street. Some buildings may be empty because it is being redeveloped for a new store, he said.

In addition, he believes that the high rent is not the sole reason why small businesses don’t survive on the street.

“It’s easy to blame the landlord or e-commerce but that’s seldom to blame for that,” said Jammen. “How are sales doing?”

He continued to say that is all about supply and demand with the market; the rents are going up because the demand is going up.

These days, he said, “Smaller businesses need to have the right business plan to survive.”

That includes constantly rotating the window display, having new products in the store, and having a strong e-commerce plat- form as well, he said.

But Messino said, “If Newbury Street were to survive, rent has got to go down in order for anything small or large to survive.”

Messino said it is only a question on when the landlords will start to bring down the rents but it has to happen for retail every- where in order for tenants to be able to support themselves.

Another common trend that Messino has seen are pop-ups, or stores that open up for a few months, test the market, and then close back up again.

“So many pop-ups test the market here but then don’t sign a long-term lease because they find the rents are too high,” said Messino.

Recently, the pop-up Frank and Oak clothing store closed up after being in Boston for close to two years.

“We loved being a part of the Boston community during the past two years or so,” wrote Sophie Desbiens the senior PR Manager for Frank + Oak in e-mail. “Our Newbury Street location was meant to be a pop-up location since day one and it’s simply time for us to test different markets.”

Desbien said that they will continue to engage Boston customers through the mobile app and web experience. “That being said, it doesn’t prevent us from re-evaluating any opportunity in the Boston area in the future,” wrote Desbien.

Some brick and mortar stores along Newbury Street started as primarily e-commerce and then once online moved to open a brick and mortar shop. One example along Newbury Street is Indochino, a custom clothing shop for men that sells suits and tuxedos.

Messino pointed out that once a company has a strong online presence it is easy to open up a few shops in prime locations.

“They might be writing off the storefront as advertising,” said Messino. “But not every brand can do that.”

The International Poster Gallery that called Newbury Street home for over 22 years, recently decided to move locations to SoWa, the open market and gallery space in the South End.

The owner, Jim Lapides, said that they had an unusual situation. The owner of their building changed hands a few years ago and bought the building next door. The new owner wanted to combine the two buildings and change the layout.

“It will be a great building but it would have been much more expensive,” said Lapides. “On top of that we couldn’t really deal with moving twice, let alone once. It just didn’t make sense.”

Although he loves Newbury Street, Lapides said that SoWa has a lot of good perks too with nearby parking, modern facilities located in a vibrant and upcoming neighborhood that already has a rich arts community.

“But look, I love Newbury Street too. I love it a lot,” said Lapides. “There are a lot of challenges on Newbury Street right now, but you can’t get anywhere else the same ambience of the street that attracts great clients.”

He continued, “It will find the right formula to survive…but there are a lot of empty buildings as everything changes over.”

Lapides said that all of retail is changing and that there will be a shift that will impact the street. But, he said, the street will find its own algorithm and solution. There are certain types of retail that is ideal for.

He said, “You can’t eat lunch on the internet.”

Similarly, getting a hair cut or nails done also can’t be done on the Internet. Along Newbury Street there are currently 49 stores labeled as a salon, health or beauty according to the Newbury Street League directory.

If there is one thing Newbury Street is not short of – it is nail salons. A quick look on Google Maps shows 15 nail salons that run either on or nearby Newbury Street.

In addition, fitness centers are also on the rise. Places such as Boston Sports Club, Fitness Together and Reebok Crossfit Back Bay have taken hold on Newbury Street that is primarily known for its retail experience.

Thom Brown, the owner of Kixters, a men’s and women’s shoe store at the end of Newbury Street, said that e-commerce isn’t really causing them problems because when it comes to shoes, people still need to try them on.

Kixters has called Newbury Street home for over 20 years and is currently closed to go under renovations but still has a large online presence.

Brown said that one thing that has definitely gone up is the taxes and, he said, everyone struggles when they raise the taxes.

“The tax increases are hard and the City needs to start to bring it down but there are a lot of disruptives with e-commerce and things like that,” said Brown.

After hearing that many of the art galleries are closing shop along Newbury Street, Brown became concerned.

“The very reason that makes Newbury Street cool are the art galleries, little restaurants, and tchotchke shops but they get driven out by the rents,” said Brown. “When we moved to Newbury Street that’s what it was like and now it’s like a mall.”

Brown said, that there is a need for the art galleries on Newbury Street because they attract people to the area. Once the artists are driven out he said, people will seek them out and go there instead. Brown said, “People don’t want to see a Gap (store) everywhere.”

Despite all the change Messino still has hope for Newbury Street. “Newbury Street is an awesome street. It’s worth visiting; it’s beautiful and charming,” said Messino. “It’s not going to go away and it is not all about being able to pay rent. It has a lot to offer and it will survive.”

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