New York City’s coffee scene is undergoing a significant transformation as the Chinese coffee chain, Luckin Coffee, capitalizes on the retreat of its long-standing competitor, Starbucks. The Seattle-based giant, once a dominant presence on Manhattan’s streets, is facing a contraction, closing multiple locations and creating opportunities for Luckin to establish itself in the market.
The shift in the competitive landscape has become evident as Starbucks prepares to close an additional five stores in New York City early in 2024. This follows a challenging year for the coffee chain, which has faced declining sales for six consecutive quarters. According to the Center for an Urban Future, Starbucks has closed a total of 42 locations in the city this year, reducing its footprint to 286 stores, down from 351 in 2019.
Brokers have confirmed that Luckin Coffee is actively pursuing the vacant properties left behind by Starbucks. James Famularo, president of Meridian Retail Leasing, noted that the Chinese chain is focusing on smaller, to-go locations that align with its business model, which offers drinks at prices approximately 30% lower than Starbucks. Famularo remarked, “There are a lot of negotiations going on involving Luckin… It wouldn’t be surprising if a year from now Luckin has quadrupled its spaces. They are that active.”
As Starbucks attempts to redefine its strategy, it is investing in larger locations intended for customers to linger, socialize, or work. Recently, the company announced the reopening of a store at 1585 Broadway in Manhattan after renovations by Morgan Stanley. Despite these efforts, Starbucks spokesperson Sam Jefferies stated, “Opening and closing stores is a standard part of our business.” Currently, there are no additional openings planned for the near future.
The abrupt closures of Starbucks stores have sent ripples through New York’s real estate market. Once regarded as a reliable tenant that generated foot traffic and guaranteed rent payments, the chain’s reputation has been tarnished. Jeffrey Roseman, vice chairman of Newmark Retail, commented that Starbucks closed multiple leases with little notice, leaving landlords and building managers blindsided. “They literally put signs in windows overnight without telling landlords and building managers,” he said.
This restructuring is part of a broader plan that is projected to cost around $1 billion, including the closure of 400 stores across the United States and the layoff of 900 corporate employees. Analysts suggest that the pandemic has significantly impacted Starbucks, as many former customers have shifted from visiting stores daily to brewing coffee at home or relying on workplace perks.
The evolving landscape has opened the door for Luckin Coffee, which operates over 26,000 stores globally. After successfully launching nine locations in New York City within seven months, the company is strategically targeting the areas vacated by Starbucks. With ongoing negotiations for several sites, Luckin’s aggressive expansion could mark a new chapter in the city’s coffee wars.
As the competition heats up, the fate of Starbucks in New York City hangs in the balance, while Luckin Coffee positions itself as a formidable contender in the market.
