(Page 2 of 3)

In the first half of the decade, the booming economy sent rents soaring. Competition for space was fierce, and national chains were elbowing one another to claim ground in a city they once scrupulously avoided. The recession that followed may have flattened some rents, but it also delivered a new blow to the independent shopkeepers who, unlike their national competitors, had fewer reserves to fall back on.

"They have a distinct advantage by virtue of having a pool of money. We have no access to other money. I can't afford to wait anything out," Nudelman says. "In the past five years, I can't tell you how many of us have gone out of business."

A study last year by U.S. Rep. Anthony Weiner's office found that of 5,991 stores surveyed citywide, 726 had closed or were in the process of closing—more than 12 percent.

According to the federal Small Business Administration, the number of SBA-approved small-business loans in the five boroughs plummeted in recent years, dropping from 4,012 in the 2006-to-2007 fiscal year to 669 last year, a drop of 500 percent. (The number of loans in New York City did rise 64 percent in the first 10 months of the current fiscal year over the same period last year, a jump the SBA attributes to the Recovery Act, which provided a 90 percent guarantee to SBA loans and eliminated loan fees for borrowers.)

Steve Null, an advocate for small businesses who founded the Coalition for Fair Business Rents in 1984, cites the number of commercial eviction warrants—nearly 29,000 in New York City between 2006 and 2009—as an indicator of how businesses are struggling. Null estimates that only about 33 percent of business closures result in evictions and uses that estimate to infer that 87,000 small businesses have closed over that period.
"We're digging a hole," says Null, who championed city legislation two years ago that would have implemented protections for merchants in the commercial-lease-renewal process but was never enacted. "Small businesses were the engines that created jobs in New York City."

Even data that encompass the boom years suggest that the growth of larger businesses is outpacing that of smaller businesses in New York City. The number of businesses with 500 to 999 employees jumped 50 percent in Brooklyn alone between 2002 and 2007, from 34 to 54, compared with a 20 percent increase—24,744 to 30,173—in all Brooklyn businesses over that period, according to U.S. Census figures. The Census data show just how vital to the city's economy small businesses are: Establishments with four or fewer workers account for 61 percent of all businesses with employees citywide.

Studies by the think tank Center for an Urban Future show that over the past two years, chain stores have increased their presence in the city, even as the economy has foundered.
"We did find that for a surprising number of the chains ... many of them actually added stores at a time when there was a pretty profound recession going on," says the center's director,

Jonathan Bowles. "It made me think that maybe some chains like Dunkin' Donuts or Walgreens may be taking advantage of the decline in real estate prices in this downturn in order to expand. Some chains went out of business, but a good number of the national chains were actually expanding in New York. I think it's certainly possible that some mom-and-pop businesses shut down in this economy and chain stores are taking their spots."

It's a trend that has alarmed many neighborhood activists and preservationists, who fear that the loss of independent stores along main streets will erase some of the distinctive culture that makes New York New York.

"When you go into a store, and maybe the owner knows you by name, maybe their kids go to the same school your kids go to, maybe they live in the neighborhood—these are [interconnected] relationships that really matter to how you participate in the place where you live and that are severed when national chains move in," says Stacy Mitchell, author of the book Big-Box Swindle and a senior researcher for the Institute of Local Self-Reliance, a Minneapolis-based nonprofit. "The neighborhood loses its personality. It no longer has that sense of community that comes from people in the neighborhood being knit together in a web of social and economic relationships."

The phenomenon is a familiar one in some high-rent environs of Manhattan, where stretches of several neighborhoods—notably Soho, Greenwich Village and the Upper West Side—have been transformed into virtual strip malls with combinations of stores identical to main streets anywhere in the U.S.

"We're very concerned about it. One of the things we celebrate cities for and about is their livability—their street life and diversity—so to see small retail businesses, mom-and-pop businesses, disappearing is something of great concern to those of us who care about quality of life," says Vin Cipolla, president of the Municipal Arts Society, a planning and preservation group. "It's obviously disappearing across the city. We can see it in every neighborhood. We see it on the sidewalks. It's altering the character of our city forever, and it's a big deal."

The loss is also an economic one. According to the state Department of Labor, 1 out of every 7 employed New Yorkers works for a business with fewer than 10 people on staff. Small businesses generate billions in taxes and fees for the cash-strapped city and state. National studies show that for every $100 spent in a locally owned business, $85 is reinvested in the community—whether in paychecks for employees or goods and services purchased from other local businesses—compared with the $15 that stays local when that $100 is spent at a national chain.

"I take my money and spend it in Brooklyn," Nudelman says. "Their money goes back to a corporate office."

Independent businesses also offer more stability for their employees. Eric Treworgy, CEO of STRIVE, an East Harlem–based employment agency, says chains tend to offer mostly part-time positions, causing their workers to change jobs more frequently. Small employers, while they may not be able to offer the varied opportunities and benefits of a larger company, tend to hire full-time workers.

The decline in the economy has led to less shopping in general. Meanwhile, the ever rising premium rents on 86th Street have made competition cutthroat. Century 21 has begun selling pet beds. The national pet superstores, Nudelman says, have different kinds of resources to survive the downturn.