Upscale Mom and Pop stores learn to survive.

There is an old saying that everything old is new again, and this certainly holds true for the commercial real estate industry. Seemingly, there is a new trend in retailing -- more and more local New York retailers are renewing their leases -- but this really is an old trend that often reappears when the economy is strong.

It is apparent that there is little quality retail space available in today's extremely tight market, and the perception is that this is due to the influx of national chain stores and a renewal interest by European tenants in opening new shops in Manhattan. This, however, is only a portion of the story. A major cause of the tight retail market is a marked increase in the rates that renewal tenants are willing to pay to stay in their current locations and extend their leases.

There are many great stories about tenants who have been around for decades, including several businesses that have been passed down from one generation to the next. As brokers with Douglas Elliman since the late 1970's, we have seen many tenants come and go in the buildings we manage, but recently we have been surprised by the efforts of tenants to renew. One such tenant is the 90th Street Pharmacy at the Northwest corner of Madison Avenue and 90th Street. The great pharmacy wars have increased the number of pharmacy locations in New York City for Rite Aid, CVS, Duane Reade and others, but it was a creative approach that helped a long time tenant, Mr. Basselino, renew his lease at the 90th Street Pharmacy. Douglas Elliman arranged for Basselino to pay advance rent for a long-term lease giving the co-op building where his store is located a solution to a financial situation. By financing the advance rental situation, the tenant was able to realize a lower monthly payment than he would have had to contend wit h if he had simply renewed his lease and paid monthly rent. The end result of this transaction is that the co-op building is happy, and the 90th Street Pharmacy, a fixture in the neighborhood for over 40 years, will remain in its location, and, most importantly, continue to serve it loyal neighborhood customers.

Several other Upper East Side tenants who have inhabited the neighborhood for several years have also had the opportunity to renew their leases, and many are successfully paying the higher rents and even thriving. P.S. I Love you, a gift shop at Madison and 89th Street, recently agreed to pay the market rent to keep their locations. Others who have also renewed their leases are The Tiny Doll House at Lexington Avenue and 79th Street; Lew-Capp Meats at Madison Avenue and 96th Street; and Delta Hair at Lexington Avenue and 72nd Street. Some stores are even pushing their boundaries. For example, Gerald Bland Gallery has taken additional retail space to expand its operation at Madison Avenue and 91st Street. These renewals have helped to stabilize neighborhoods, while keeping the market tight and retail rents high. They also show realtors that there are possible sales to be made.

It is true that some Mom and Pop stores have been relegated to the side streets and less expensive neighborhoods, but this number is less than expected. Creative local retailers are finding a way to survive. As brokers, it is our responsibility to help retailers by showing them how to effectively renew their leases, or in other cases, help tenants relocate to comparable neighborhoods with more affordable rents.

For retailers, there is nothing more valuable than renewing a lease because it maintains continuity and secures their position in a neighborhood. Renewals, if the tenants are reliable and pay their rents on time, also benefit landlords and co-op boards. They too have achieved stability and maintained their neighborhoods for the long-term.

As a result of the Mom and Pop renewal trend, it has been difficult for new tenants to enter the New York retail market; however, there is always space to be found if a tenant is willing to be flexible and open minded. To break into the market, these newcomers may have to settle for space that doesn't meet every one of their requirements, but gives them entree into a neighborhood. This is particularly true for new immigrants who are now launching their businesses, and range from nail salons to cleaners, cell phone shops to gourmet food stores. These tenants, though they are just starting to familiarize themselves with the retail market in Manhattan, will eventually be the keepers of the established Mom and Pop stores of the future.

For now, both landlords and tenants are benefiting from a strong and lucrative sales market, and sales of retail products are robust and increasing. With today's powerful economy it is likely that today's Mom and Pop Stores will continue to fair well in the locations they have leased and call their business home.