The more than two dozen chain and department store restructurings and closures announced this year have sent ripples across America. But while locals may be worried, New York City has not yet been too adversely affected.
During the past six months — while powerful brands like Nike, Victoria’s Secret and Foot Locker have grabbed NYC flagships and headlines — just as many other building owners were grumbling quietly about the lack of interest in their properties.
That has led to lower asking rents, “whisper” rents and even multimillion-dollar contributions towards renovations — something that store owners had previously declined to provide. “This is the most challenging [environment] that we’ve seen in two decades,” says Faith Hope Consolo, chairman of Douglas Ellliman Retail. “Even more than post-Lehman.”
That was back in 2008 and 2009, when Lehman Brothers went bankrupt and nearly all the banks were giving up prime corners spots. Needless to say, those vacancies were filled — but now there are other empty spots from Fifth and Madison avenues to Bleecker Street and from Soho to the Meatpacking District.
On the other hand, Robert K. Futterman of RKF, says, “The Flatiron [District] is a great market and one of the strongest in the city.” But as Futterman has said in the past, the building owners had leverage over the tenants; “Now,” he notes, ”they have to kiss the tenant’s tuchuses to keep them.”
Tourist-favored places are facing challenges as visitor numbers have dipped slightly for various economic reasons. But this year’s expected total of 61.8 million travelers — 13.1 million from other countries — is huge and not to be dismissed. Luring them here are bargains found citywide. “They can now get a better bang for their buck than they would have a month or two ago,” says Heidi Learner, chief economist of Savills Studley.
“New York is now less expensive for international tourism.” But many of them may still spend less than in the past, said Peter Muoio, PhD and chief economist of digital real estate firm Ten-X, and are thus exacerbating those lower sales figures.
Still, Muoio says, “There has been a massive shift by investors interested in urban storefronts: the types of places you find Uniqlo and Zara.”
Those two fast fashion brands are among the winners in the urban retail battlefield, along with “mass-class” makeup companies like Sephora, MAC, Glossier and newcomer Ulta Beauty, which are seeking more city stores.
Food is also maintaining its appetite as fast-casual eateries, food halls and a focus on healthy eating creates long lines out the doors of spots like Chop’t on East 56th Street. “Everything’s in flux, yet some of the new trends I see include pop-ups on Madison and Lexington,” says Elliman’s Consolo.
There are even culinary pop-ups, which is more unusual, she says, because more renovations are needed. “Unless you are cheap, chic with an edge or something very focused, you will fall by the wayside.”
Last year, retail was selling at a four cap. Today, it is selling at a five cap as insiders worries about conditions pushing rents even higher, observes Gregory Kraut, managing partner of K Property Group. Kraut said “high street” rental rates are down 30 to 40 percent.
“Where something on Broadway in Soho was $1,000 per foot, today it is maybe $500 or $550 per foot,” Kraut adds. “Only a certain number of tenants have a huge marketing budget and can layer on the costs.”
A retailer that can’t afford a storefront on Broadway in Soho, he notes, may do just as well leasing a space three blocks over for $300 a foot.
“We see a lot of retailers go to blue-collar neighborhoods that are densely populated and have foot traffic and get the sales,” Kraut adds. Not only does buying online favor the online retailers, but Muoio observes that as minimum wages rise, it also impacts those with traditional brick-andmortar stores. “That makes their struggle harder,” he says.
“Retail is not dying,” insists Adelaide Polsinelli, of Eastern Consolidated.
“You can’t get your hair cut, you can’t do yoga online, you can’t put your kids into day care or not go to a physical dentist,” she explains.
“It’s shifting … it’s morphing into uses that are relative today. You [still] want to taste some wine before you buy it.”
