Competitive rents and sophisticated strategies to bring online consumers into stores are changing the retail landscape.
“Retailers are getting smarter and need to blend their bricks and mortar with the internet,” says Robert K. Futterman of RKF, now a division of Newmark Knight Frank.
Internet retailers are also opening more physical stores. Sometimes, like Bonobos and Casper, these are guide shops, where consumers are meant to touch and order — not lug purchases home.
Ikea, whose main stores are over 100,000 square feet, will be squeezing its new planning studio into 17,530 feet at 999 Third Ave. at East 60th Street and in 30 other cities to bring its best-selling items to urban customers — who will later be shipped their products at home.
“You have to bring the brand to the people here because most people don’t have cars and millennials aren’t buying cars. Ikea can’t wait for them to come out to their store in Red Hook,” says Peter Braus of Lee & Associates NYC. “We will see more of these kinds of stores.”
Other online retailers have found profits swamped by a flood of returns as free postage means customers order in multiple sizes and shapes and simply return what they don’t want.
Says Joanne Podell of Cushman & Wakefield, “Restocking charges are significant as you need labor, and it’s hard to keep track of the inventory as it goes back and forth.”
Shipping charges are also costly as companies often absorb them on the sell side but pay full freight coming back.
Now, Podell says, “It’s going to be the marriage of ecommerce and brick and mortar. Without question, anybody that has a facility to take back product in a brick-and-mortar location is experiencing a bump in sales from that customer.”
She adds, “It’s not the bogeyman people were afraid of.”
The formerly internet-only Buck Mason took a storefront at 329 Bleecker St., joining other male-focused newcomers Huckberry and Slightly Alabama.
“Now landlords are asking to get them to take a look at their space,” says Richard Skulnik of Ripco Real Estate. “The brands also see how it solidifies their sales and brand loyalty.”
As retail rents dropped across most of the city, building owners also began reaching out and offering concessions to make deals. Says Futterman, “For every tenant looking to make a deal there is a landlord ready to roll up their sleeves.”
“Concessions have become part of the conversation and people are willing to make a deal,” Skulnik adds.
Among the hottest categories are healthy food and salad spots, currently bringing in lines of customers.
“It’s a wonderful trend and not something you can buy online,” says Jason Pennington of Ripco Real Estate.
Similarly, the wellness craze has extended to the burgeoning boutique fitness facilities that are expanding into nooks and crannies on upper and lower floors of buildings.
Fitness can be a win for brokers as they tend to ink far larger deals than traditional stores and can use awkward space on different levels. Smaller fitness concepts — say, yoga and Pilates studios — are also welcome as they can co-locate. These outlets are also embraced by building owners as they become amenities for other tenants and neighborhood.
While some studios maintain a traditional “headphones on, eye contact minimal” ethos, others like Rumble are known for encouraging mingling among users by creating cozy pre-class waiting “pits.”
“We find that within that category and their price constraints they are trying to find the right markets and good fits,” says David LaPierre of CBRE.
Fitness facilities, he says, are also adding food, water, T-shirts or other merchandise, private training and unique classes, all designed to boost sales above just the membership fees.
Off-price stores and convenience stores like Target and CVS are also filing into new neighborhoods. “When you have a dense office market or residential apartments, they are welcomed everywhere,” says Skulnik of Ripco.
Entertainment, a broadly defined category that encompasses everything from virtual reality showcases to axe-throwing outposts, is another category that is growing. Examples include numerous candy outlets, escape rooms and “experiences” such as with “DreamWorks Trolls The Experience,” located on Billionaire’s Row at 218 W. 57th St.
“There is a lot of potential to use storefronts for entertainment,” says Braus, who is working with one such major tenant. “You can also have entertainment with a significant amount of retail in it.”
Over in Queens, the Amazon announcement has made Long Island City giddy. “Every significant tenant is looking out there right now. You have a daytime population. And this news is massive news and on every blog around the world,” Pennington says.
The area’s residential towers are filling up, while Vernon Boulevard and Jackson Avenue restaurants and bars are getting busy.
“Owners are not going to jump on deals just to get leased up,” explains Pennington. “They realize the ground floor is the door to their building, and they want grocery stores and markets and retailers that are important to the neighborhood.”
