---
title: "Why Prime Storefronts Stay Empty: The Economics of Retail Vacancy"
description: "Busy street, empty windows. Why owners across North America leave prime storefronts vacant instead of cutting the rent: debt, lease terms, law, tax and redevelopment."
last_updated: "2026-10-30"
---

# Why Prime Storefronts Stay Empty: The Economics of Retail Vacancy

Walk down a busy shopping street in almost any large North American city and you will see ***it***: a dark storefront between two busy ones, a "For Lease" sign fading in the window. Why? 

The answer like everything , depends. An empty storefront on a strong street is usually a rational choice by the owner, or a forced one. Debt terms, lease length, lease law, tax rules and redevelopment plans can each make waiting cheaper than signing. 

Few cities measure the problem well. New York is a good example of measuring it well. Using a street-level census of every storefront, the city Comptroller's office counted about 15,700 vacant storefronts out of 142,000 in April 2026, an 11.0% rate, above the 10.5% at the start of 2020[27, p. 3].

**11.0%** — New York City storefronts vacant (about 15,700 of 142,000)

*Source: [27] Who's Minding the Storefronts? An Analysis of Storefront Vacancies in New York City · As of April 15, 2026*

Montréal counts too. The city's 2025 survey of ground-floor and basement commercial premises, shopping centres included, found 3,500 of 28,621 empty across the agglomeration, or 12.2%[23], down from 14.1% in 2024[14]. An earlier count used a narrower base: in July 2019, about 1,000 of 7,000 premises on the city's commercial arteries were vacant, roughly 15%, against the 4% to 7% that some experts consider acceptable[15, p. 10].

**12.2%** — Commercial premises vacant in the Montréal agglomeration, ground floor and basement (3,500 of 28,621)

*Source: [23] Enquête sur l'occupation commerciale 2025 (locaux commerciaux et statuts d'occupation) · As of August 31, 2025*

## 1. A lower rent lowers the building's value

Commercial buildings are valued on their income. An appraiser divides net operating income (NOI) by a capitalization rate, the return buyers expect from that kind of property. At a 5% cap rate, every $10,000 of annual rent adds $200,000 of value. Cut the rent by $10,000 a year and, on paper, the building loses $200,000.

The effect can spread. A signed lease becomes evidence that appraisers and brokers can use when they estimate market rent for similar space, so one cheap deal can weigh on the projected income of other units nearby. It does not reset their rents automatically. An empty unit can be valued on a projected market rent, but the valuation must allow for the expected vacancy, the cost and time of leasing it, and the risk, so it is not worth the same as a leased one. For an owner, waiting can still look cheaper than signing the deal that becomes the new evidence.

## 2. The lender may not allow the cut

Most commercial buildings carry a mortgage, and the loan agreement can limit what the owner signs. Covenants test loan-to-value and debt service coverage, and some set a minimum rent for any new lease, so the owner cannot weaken the lender's collateral with cheap deals[2].

Economists Erica Moszkowski and Daniel Stackman studied these rent floors in Manhattan, the largest and most expensive retail market in the US. They found that binding rent floors substantially reduce the chance that a landlord with an empty unit signs a lease, and that covenants may have raised vacancy by as much as 14% from 2016 to 2020[3].

**Up to 14%** — Increase in Manhattan storefront vacancy attributed to mortgage rent floors, 2016 to 2020

*Source: [3] The Contractual Origins of High-Rent Urban Blight · As of December 31, 2020*

Where a covenant binds, the owner can wait, ask the lender for consent, or refinance. Each takes longer than lowering the asking rent.

## 3. The real rent cut hides in concessions

Rents do fall in a weak market. The cut just does not show in the asking rent. Owners keep the face rent (the number written in the lease) and lower the effective rent with free months and construction money.

Example:  Take a 10-year lease at $40 per square foot with 12 months free. The tenant pays for 108 of 120 months, so the effective rent is $36, 10% below the face rent. The comparable, the appraisal and the covenant test can all still read $40.

Concessions cost cash up front. A tenant improvement (TI) allowance pays to build out the space, and during free months the owner still pays tax, insurance and interest. An owner short of cash, or whose lender must approve the spending, may not be able to offer the deal that would fill the space.

## 4. A long lease locks in a bad deal

A residential lease usually runs a year. A commercial lease runs for years: CBRE reported an average term of 95 months, about eight years, for US retail leases of 1,000 to 4,999 square feet through the third quarter of 2024[24]. Renewal options can let the tenant extend at a fixed or capped rent. A rent signed at the bottom of the market can stay for most of a decade.

That makes waiting rational. Moszkowski and Stackman's work on New York storefronts finds that landlords are willing to give up rent today to keep the option of leasing to someone else later[4]. Finding a tenant takes time, and tenants differ a lot in what they can pay and how long they last. On this view, much long-run vacancy is not a mistake. It is the price of holding out for a better match.

## 5. Other tenants' leases can block a deal

Retail leases restrict the landlord too. An exclusive-use clause stops the owner from leasing to a business that competes with an existing tenant. A co-tenancy clause can give a tenant reduced rent or the right to leave if named anchor tenants close or the centre's vacancy passes a set level[5]. A cafe that wants an empty unit may be blocked by the bakery next door. The space can sit empty because the lease that would fill it breaks another one.

## 6. The law can let a space sit dark

When a tenant walks out before the lease ends, can the landlord leave the space empty and keep billing the tenant? It depends on where the building is.

In New York, yes. In *Holy Properties v. Kenneth Cole Productions* (1995), the state's highest court held that a commercial landlord has no duty to mitigate after a tenant abandons the premises[6], because a lease is a conveyance of property, not an ordinary contract.

In Canada's common-law provinces, the 1971 Supreme Court case *Highway Properties v. Kelly, Douglas* gives a landlord several options when a tenant repudiates a lease. Courts have read it to mean that a landlord that refuses the repudiation and keeps the lease alive does not have to re-let[7]. The Supreme Court of Canada heard an appeal on that rule, *Aphria Inc. v. Canada Life Assurance Company*, on February 18, 2026. As of October 30, 2026, it had not released a judgment[8].

Quebec works differently. Its leases fall under the Civil Code, not the common law. Article 1479 says a person bound to make reparation for an injury is not liable for any aggravation of that injury the victim could have avoided[18], and Ontario's Court of Appeal noted in Aphria that Quebec's law on mitigation is found in the Civil Code[19]. The article does not expressly require a landlord to re-let, but on our reading, a Quebec landlord that makes no effort to re-let risks recovering less.

Some US states require landlords to mitigate damages after a tenant defaults or abandons the premises. Texas does so by statute[25], and Illinois requires a landlord to take reasonable measures to mitigate[26]. Where no such duty applies, a landlord with a solvent former tenant has little reason to rush into a new deal at a lower rent.

## 7. Tax rules set the cost of waiting

Property tax is the main cost of holding an empty unit, and it often falls when the building's income falls, because assessors value commercial property on income. In Ontario, the province's assessment agency began factoring average vacancy into assessments, while owners could also claim a property tax rebate for vacant space[9].

Ontario has since moved the other way. Toronto ended its Vacant Unit Tax Rebate Program on July 1, 2018; in its last six months it still refunded 15% of the tax on vacant commercial space[10]. The province's 2018 budget expected most municipalities to phase out their share of the rebate by 2020[9].

Some cities now charge more for vacancy. San Francisco taxes ground-floor commercial space that stays empty for more than 182 days in a year: $250 per linear foot of frontage after one year, $500 after two consecutive years and $1,000 after three[11]. Washington, DC taxes vacant property at 5% of assessed value and blighted property at 10%[12].

Quebec is testing the idea. Rimouski adopted a tax on vacant downtown commercial premises in 2023, charged 12 months after the city establishes that a space is not in operation, at $100 per square metre on the first 500 m² and $10 beyond[20]. Policy Options reports that downtown vacancy fell from 13% to 9% between the tax's introduction and the end of 2025[20]. The decline followed the tax; it does not prove the tax caused it. The tax has also faced a legal challenge from a property company.

Montréal has studied the same tools. In 2020, a city council commission recommended a registry of commercial premises, followed by an analysis of a vacancy tax or a regulatory charge once the data existed[15]. The executive committee supported the data collection and deferred the fiscal analysis[16, pp. 5–6]. On May 21, 2026, Québec solidaire MNA Alexandre Leduc asked the city to tax commercial vacancy in Hochelaga-Maisonneuve[21]. In British Columbia, Vancouver's council voted in 2022 to ask the province to explore an empty-storefront tax; Global News reported at the time that the city could not levy one unless the province amended the Vancouver Charter[22].

Vacancy taxes have a trade-off. In Moszkowski and Stackman's model of Manhattan, a proposed vacancy tax pushes landlords to fill space with less profitable tenants who are more likely to leave early, so it has only a small effect on vacancy and rents[4]. That is a modelled counterfactual, not an observed result.

Advocates of a land value tax go further. Taxing land instead of buildings makes an under-used lot expensive to hold whatever stands on it, and so pushes owners to lease, build or sell. That is an argument, not a settled result: few North American cities use one.

## 8. Opening the store takes months and money

Signing a lease is only the start for the tenant. A new business can need a zoning check, a building permit, health and liquor licences, and inspections. Building codes treat a change in a space's authorized occupancy as a change of use[13]. A new use, such as a restaurant in a former shop, can require accessibility, exit, ventilation, fire-protection or parking upgrades, and older buildings can need several of them.

Zoning can narrow the field before codes do. In a brief to Montréal's 2020 consultation, one rue Saint-Denis merchant said borough rules then barred whole categories of shops, capped premises at 150 m² and stopped empty shops from becoming housing, and that the borough had just relaxed them[17].

The tenant pays rent, or negotiates free rent, through all of it. The higher the upfront cost, the fewer tenants can take the space and the more concessions they ask for. That loops back to point 3.

## 9. The owner is waiting for something else

Some storefronts are empty because the owner does not want a long-term tenant. An owner who expects to rezone, assemble neighbouring lots or sell to a developer will avoid a 10-year lease that would block demolition, or will sign only short leases with a termination right. A dark ground floor on a lot whose zoning allows far more than what stands there is often a site being held for redevelopment.

Montréal's 2020 commission recorded the same concern: reports of owners leaving street-front premises empty while waiting for property values to rise, and rent increases steep enough that they could favour large chains over independent businesses[15, p. 11].

Others are stuck. An estate in probate, co-owners who disagree, or a loan in default can leave a space empty for years with nobody able to sign a lease.

## Which streets go dark

Vacancy is not spread evenly. US retail vacancy was about 4% in 2024, measured by floor area, yet some New York neighbourhoods passed 30% on the same measure[27, p. 16]. It also clusters: a New York storefront within one block (250 feet) of a vacant one is 30% more likely to be vacant than a storefront picked at random[27, p. 6]. An empty unit means fewer people on the block, and it can trigger co-tenancy clauses in the leases next door (point 5). One vacancy makes the next one easier.

**30%** — More likely to be vacant: a New York storefront within one block (250 ft) of an empty one

*Source: [27] Who's Minding the Storefronts? An Analysis of Storefront Vacancies in New York City · As of April 15, 2026*

The data from New York and Montréal point to a few kinds of places, and each one leans on different mechanisms from the list above.

### Downtowns and prime corridors

The highest rates sit in the most valuable places. In New York, 21.1% of storefronts are empty in the Financial District–Battery Park City, 18.1% in Chinatown–Two Bridges and 17.7% in East Midtown–Turtle Bay[27, p. 4]. Montréal's downtown borough, Ville-Marie, had 980 of its 4,279 commercial premises empty in 2024, or 22.9%, the highest of the city's 19 boroughs[14]. Downtown Seattle's retail vacancy was 12.63% in 2024, against a city median of 2.95%[27, p. 16]. These are high-value, heavily financed buildings, where a rent cut hurts the valuation most and lender rent floors are most likely to bind (points 1 and 2). The Manhattan covenant research above is a study of exactly these streets.

**Storefront vacancy, selected New York neighbourhoods and boroughs**

| Category | Value |
| --- | --- |
| Financial District–Battery Park City | 21.1% |
| Old Astoria–Hallets Point | 20.1% |
| Ocean Hill | 19.5% |
| Chinatown–Two Bridges | 18.1% |
| East Midtown–Turtle Bay | 17.7% |
| New York City | 11% |
| Bronx (borough) | 8% |
| Staten Island (borough) | 7.5% |

*Source: [27] Who's Minding the Storefronts? An Analysis of Storefront Vacancies in New York City · As of April 15, 2026*

### Lower-income neighbourhoods

High vacancy is not only a downtown story. In Brooklyn, Ocean Hill (19.5%), East New York (North), and parts of Bedford-Stuyvesant and Crown Heights form a broad zone above 15%[27, p. 4], and an earlier City Council analysis found that lower-income census tracts were more likely to pass 20% vacancy[1]. In Montréal, Mercier–Hochelaga-Maisonneuve was at 15.4% in 2024[14]. On these streets the limit is often what a tenant can pay, build-out included (point 8), more than what the owner holds out for. A lower asking rent does not help much if a new business cannot afford to open.

### Older main streets in transition

Central neighbourhoods with long commercial streets sit in between. Le Sud-Ouest was at 17.5% and Le Plateau-Mont-Royal at 14.7% in 2024[14]. Montréal's 2020 commission heard a long list of causes on such streets, including road and construction work that cut traffic, online shopping, rules that were too rigid, and speculation on fashionable streets[15, pp. 12–13]. Here the zoning and permit friction of point 8 and the waiting owners of point 9 tend to meet.

### Outer residential areas

Vacancy is lowest away from the core. Pierrefonds-Roxboro (7.1%) and LaSalle (8.5%) had Montréal's lowest borough rates in 2024[14], and Staten Island (7.5%) and the Bronx (8.0%) have New York's lowest borough rates[27, p. 3].

**Commercial vacancy, selected Montréal boroughs**

| Category | Value |
| --- | --- |
| Ville-Marie (downtown) | 22.9% |
| Le Sud-Ouest | 17.5% |
| Mercier–Hochelaga-Maisonneuve | 15.4% |
| Le Plateau-Mont-Royal | 14.7% |
| Montréal agglomeration | 14.1% |
| LaSalle | 8.5% |
| Pierrefonds-Roxboro | 7.1% |

*Source: [14] Portrait du commerce de rue à Montréal, mai à août 2024 (enquête terrain sur l'occupation commerciale) · As of August 31, 2024*

Wherever it happens, vacancy tends to last. In many New York neighbourhoods, 60% to 80% or more of the storefronts vacant in early 2026 had been empty for at least nine months[27, p. 13].

![Three-storey brick building with a mansard roof above the closed La Abuela D' restaurant, Queen Street West, Toronto](image)

## What a long-vacant storefront tells you

- **Ask for the effective rent, not the asking rent.** Free months and TI allowances are where the real price is set.
- **Find out who owns it and who lends against it.** A lender, an estate or a group of heirs may make the decision, not the name on the sign.
- **Check the zoning.** If the lot allows much more than what stands there, the owner may be holding it for redevelopment, and may be willing to sell.
- **Price the change of use before you sign.** Code upgrades for a new use are often the largest unknown cost.

Bucky shows the zone, what can be built and the approval route for lots in the cities it covers, with each rule sourced to the bylaw. It is a quick way to see whether an empty storefront sits on a site worth more as something else.

## Summary

| Mechanism | What drives it | Effect on vacancy |
| --- | --- | --- |
| Valuation | Value is rent divided by the cap rate | A rent cut lowers the building's value on paper |
| Loan covenants | Minimum rents and value tests in the mortgage | The owner may not be allowed to sign a cheaper lease |
| Concessions | Owners cut effective rent, not face rent | Owners short of cash cannot offer the deal |
| Lease length | Multi-year terms, often 5 to 10 years | Owners hold out for a better tenant |
| Other leases | Exclusive-use and co-tenancy clauses | Some tenants cannot be signed |
| Lease law | No duty to mitigate in some places | The owner can bill the old tenant instead |
| Tax | Assessments, rebates and vacancy taxes | Sets the cost of waiting |
| Fit-out and permits | Change-of-use code upgrades | Fewer tenants can afford the space |
| Redevelopment and disputes | Rezoning, land assembly, estates | The owner wants no long-term tenant, or cannot sign one |

## Sources

1. [Vacant Storefronts](https://council.nyc.gov/data/vacant-storefronts/) — Dataset · New York City Council Data Team. Accessed October 30, 2026.
2. [Mortgage covenants and storefront vacancy in Manhattan (working paper, Moszkowski and Stackman)](https://dash.harvard.edu/entities/publication/420d0170-1a20-46a1-b831-738a954dd58a) — Research · Harvard University (DASH). Accessed October 30, 2026.
3. [The Contractual Origins of High-Rent Urban Blight](https://marginalrevolution.com/marginalrevolution/2024/01/the-contractual-origins-of-high-rent-urban-blight.html) — News · Marginal Revolution. Accessed October 30, 2026.
4. [Option Value and Storefront Vacancy in New York City (working paper, Erica Moszkowski and Daniel Stackman)](https://emoszkowski.github.io/ericamoszkowski.com/Moszkowski_JMP.pdf) — Research · Erica Moszkowski. Published April 10, 2026. Accessed October 30, 2026.
5. [Special Considerations in Retail Leasing](https://phillipslytle.com/special-considerations-in-retail-leasing/) — News · Phillips Lytle LLP. Published November 8, 2024. Accessed October 30, 2026.
6. [Holy Properties Ltd., L.P. v. Kenneth Cole Productions, Inc., 87 N.Y.2d 130 (1995)](https://www.law.cornell.edu/nyctap/087_0130.htm) — Government · New York Court of Appeals, via Cornell LII. Accessed October 30, 2026.
7. [Will the Supreme Court of Canada impose a duty to mitigate on commercial landlords?](https://www.blg.com/en/insights/2025/07/will-the-supreme-court-of-canada-impose-a-duty-to-mitigate-on-commercial-landlords) — News · BLG. Accessed October 30, 2026.
8. [Case 41665: Aphria Inc. v. Canada Life Assurance Company (docket)](https://www.scc-csc.ca/case-dossier/info/dock-regi-eng.aspx?cas=41665) — Government · Supreme Court of Canada. Accessed October 30, 2026.
9. [From rebates to taxes: The evolution of tax treatment for vacant properties in Ontario](https://gowlingwlg.com/en/insights-resources/articles/2022/ontario-evolution-tax-treatment-vacant-properties) — News · Gowling WLG. Published February 25, 2022. Accessed October 30, 2026.
10. [Non-Residential Properties: Tax Capping and Vacant Unit Tax Rebate insert (2018)](https://www.toronto.ca/wp-content/uploads/2018/04/9099-Non-Residential-Properties-Tax-Capping-and-Vacant-Unit-Insert.pdf) — Government · City of Toronto. Accessed October 30, 2026.
11. [Commercial Vacancy Tax (CVT)](https://sftreasurer.org/CommercialVacancy) — Government · San Francisco Treasurer & Tax Collector. Accessed October 30, 2026.
12. [Vacant and Blighted Buildings](https://dob.dc.gov/vacantbuildings) — Government · DC Department of Buildings. Accessed October 30, 2026.
13. [BP 29: Commercial Change of Use](https://www.spokanecounty.gov/DocumentCenter/View/59218/BP-29-Commercial-Change-of-Use) — Government · Spokane County Building and Planning. Accessed October 30, 2026.
14. [Portrait du commerce de rue à Montréal, mai à août 2024 (enquête terrain sur l'occupation commerciale)](https://ville.montreal.qc.ca/pls/portal/url/item/28EECD26BF5AA0B0E0630A930132A0B0) — Dataset · Ville de Montréal. Accessed October 30, 2026.
15. [Problématique des locaux vacants sur les artères commerciales : rapport et recommandations](https://ville.montreal.qc.ca/pls/portal/url/ITEM/A71AFB682DE3D036E0530A930132D036) — Government · Ville de Montréal, Commission sur le développement économique et urbain et l'habitation. Published May 7, 2020. Accessed October 30, 2026.
16. [Réponse du comité exécutif au rapport et recommandations sur la problématique des locaux vacants sur les artères commerciales](https://ville.montreal.qc.ca/pls/portal/docs/PAGE/COMMISSIONS_PERM_V2_FR/MEDIA/DOCUMENTS/REPONSECE_VACANT_20210222.PDF) — Government · Ville de Montréal, comité exécutif. Published February 22, 2021. Accessed October 30, 2026.
17. [Les locaux vacants sur les artères commerciales de Montréal (mémoire)](https://ville.montreal.qc.ca/pls/portal/url/ITEM/9CD1CFAFA9F4F0B4E0530A930132F0B4) — Public consultation · Mycoboutique inc.. Published January 20, 2020. Accessed October 30, 2026.
18. [Civil Code of Québec, art. 1479](https://www.legisquebec.gouv.qc.ca/en/document/cs/CCQ-1991) — By-law · LégisQuébec. Accessed October 30, 2026.
19. [Refusing to Recognize a Duty to Mitigate for Commercial Landlords (Canada Life Assurance Company v. Aphria Inc., 2024 ONCA 882)](https://supremeadvocacy.ca/2024/12/11/commercial-tenancy-repudiation-of-lease-duty-to-mitigate/) — News · Supreme Advocacy. Published December 11, 2024. Accessed October 30, 2026.
20. [Taxer les locaux vacants : un outil pour influencer le développement urbain](https://policyoptions.irpp.org/fr/2026/06/taxe-locaux-vacants-municipalites/) — News · Options politiques (IRPP). Published June 10, 2026. Accessed October 30, 2026.
21. [Locaux vacants dans Hochelaga-Maisonneuve : le député solidaire Alexandre Leduc demande de taxer l'inoccupation commerciale dans sa circonscription](https://www.quebec.ca/nouvelles/actualites/details/locaux-vacants-dans-hochelaga-maisonneuve-le-depute-solidaire-alexandre-leduc-demande-de-taxer-linoccupation-commerciale-dans-sa-circonscription-70543) — News · Aile parlementaire de Québec solidaire, via Québec.ca. Published May 21, 2026. Accessed October 30, 2026.
22. [Vancouver council votes to explore controversial empty storefront tax](https://globalnews.ca/news/8792725/vancouver-empty-stores-tax) — News · Global News. Published April 27, 2022. Accessed October 30, 2026.
23. [Enquête sur l'occupation commerciale 2025 (locaux commerciaux et statuts d'occupation)](https://donneesquebec.ca/recherche/dataset/vmtl-locaux-commerciaux) — Dataset · Ville de Montréal, via Données Québec. Published December 15, 2025. Accessed October 30, 2026.
24. [Low supply, changing consumer preferences lead to longer retail lease terms](https://www.cbre.com/insights/briefs/low-supply-changing-consumer-preferences-lead-to-longer-retail-lease-terms) — Research · CBRE. Accessed October 30, 2026.
25. [Texas Property Code § 91.006, Landlord's Duty to Mitigate Damages](https://statutes.capitol.texas.gov/Docs/PR/htm/PR.91.htm#91.006) — By-law · Texas Legislature. Accessed October 30, 2026.
26. [735 ILCS 5/9-213.1, Duty of landlord to mitigate damages](https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=073500050K9-213.1) — By-law · Illinois General Assembly. Accessed October 30, 2026.
27. [Who's Minding the Storefronts? An Analysis of Storefront Vacancies in New York City](https://comptroller.nyc.gov/wp-content/uploads/documents/Whos-Minding-the-Storefronts.pdf) — Government · Office of the New York City Comptroller. Accessed October 30, 2026.


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