As Frank Sinatra promises, “If I can make it there, I can make it … anywhere.” New York represents a hub for students and workers, artists and financiers, young and old alike. It’s a bustling metropolis,  every block thrumming with life. But its desirable real estate comes at a price: New York is one of the most expensive cities for people to live and for retailers to set up shop.

Corner stores and bodegas, as well as national chains like Duane Reade to Rite Aid, often anchor individual city blocks. But as chains shutter their locations in the city, driven out by high rents, many of these spaces remain empty. In just the past four years, 222 national chain pharmacies have closed in New York City. Yet demand for commercial real estate continues to be intense, such that many firms complain about their inability to find locations to rent. What can explain this ongoing paradox?

A key reason involves radical changes to the drugstore business. Three of the biggest national chains announced plans to reduce the numbers of their store locations. Rite Aid filed for bankruptcy in October 2023, citing high rents, mismanagement, and retail loss as contributing factors. The pandemic also created staffing shortages industry-wide, and e-commerce has made many brick-and-mortar locations defunct.

In addition, the chain pharmacies are often locked into lengthy leases, even if the stores themselves close. Because commercial leases can last 10, 15, or 20 years, and demand pre-pandemic rent rates, the renters have to keep paying the rent, and the landlords have little incentive to find new tenants.

Many of the stores are also relatively large in size, and it’s also difficult to subdivide the sprawling spaces. Most current vacancies range from 8,000 to 15,000 square feet; few modern businesses require that much space. The instillation of new walls and separate utility capabilities also is expensive, and owners would be expected to absorb these cost. Whether they actually can or not, most of them choose not to, especially in less desirable locations, including storefronts on secondary corners.

Locals who live and work near shuttered locations have expressed concern, because the empty storefronts tend to attract illegal activity, as well as dissuade shoppers from visiting nearby stores. In response to allegations that the city is not doing anything to address the problem, the New York City Council passed a new zoning plan in June 2024, allowing the large spaces to be turned into experiential businesses, such as microbreweries, laser tag venues, or play centers. But such a solution may be only temporary, and it does not address the substantiative needs of locals who hope to shop on their block for their daily necessities.

Discussion Questions 

1. Why is the drugstore sector in New York City specifically struggling so much?
2. What other zoning changes might help incentivize landlords to subdivide these spaces? What changes could incentivize businesses to rent these spaces?

Sources: Stefanos Chen, “The Zombie Pharmacies That Are Holding Back New York City Retail,” The New York Times, August 6, 2024; Anna Staropoli, “Rite Aid’s Empty Storefronts: What Will Fill Them?” TSCG, October 20, 2023; Michael McDowell, “Zombie’ Pharmacies Plague UES, May Remain Empty For Years: Report,” Patch Media, August 6, 2024