For retail, the “new normal” has become constant reinvention for brands and business owners alike.
“The conversation is, ‘What is the future of retail?’ We are settling into what is that future,” says Brandon Singer of Cushman & Wakefield.
“What we are witnessing is a complete change and total transformation of the way people buy and consume,” says Steven Cornwell of Woods Bagot, who worked on the South Street Seaport’s redevelopment for many years. “There is a transformation of consumption and the way people live and the expectation of experiences.”
In the past, when retail stores were desirable, buildings and retail condominiums were bought and resold. “There was a lot of competition, and values were bid up, and projections that were made were unrealistic,” says Michael Cohen of Colliers International. “We now have a disconnect between ‘high street’ retail and what tenants will actually pay, so there’s an oversupply.”
Explains Brad Mendelson of Colliers, “The problem now is that rents are too high, and tenants are tired of losing money.”
Along Fifth Avenue, for instance, few deals were made north of 49th Street and several major stores — like those once home to Henri Bendel and Ralph Lauren — are dark.
“We have 200,000 square feet of available prime Fifth Avenue space,” notes Mendelson. “I’ve never seen that.”
Large stores — which either don’t have enough product to fill them, lack good design or mismanage their businesses — are no longer relevant, says Joanne Podell of Cushman & Wakefield.
“You have to offer a product or service that people are looking to you to provide,” Podell says. Her client, Nike, at 650 Fifth Ave., “is doing great,” she says. “It’s constantly packed — it’s experiential and sells great product.”
There are other success stories. Family-owned jeweler David Yurman just opened at 5 E. 57th St. opposite Tiffany. Lululemon at 592 Fifth and Sephora at 580 Fifth are also doing well, Podell says, though they’re located between 42nd and 49th streets.
Gene Spiegelman of Ripco Real Estate — who represents Ralph Lauren in marketing its vacant store at 711 Fifth Ave. between 55th and 56th streets — is optimistic. “It’s the center of Manhattan, it has the highest office rents, Rockefeller Center, the Museum of Modern Art, with a nexus to Times Square, the parade routes, the Museum Mile — and none of that is going away,” he says.
There is also “disconnect” between the few deals on high-retailing streets of Manhattan and more transactions in residential neighborhoods and the other four boroughs, says Spiegelman.
There, deals are regularly being made for food, service and fitness tenants. But, he adds, “You can’t deny that overall velocity is down and every deal that gets made is a precious transaction.”
Where there is good pedestrian traffic — preferably seven days a week — and the space is reasonably priced and the right size and shape, Cohen says there are multiple tire-kickers and takers.
Since rents “have been all over the place” and a lot of inventory has been on the market for several quarters, Paul Berkman of JLL says seasoned brokers are trying to find the path to the right tenant — and the right price.
Lower rents heat up the retail market and fill up those storefront vacancies. “The correction in the market allows areas to reinvent themselves,” adds Joel Stephen of CBRE.
Hugo Boss just signed to move from 555 Broadway to 568 Broadway on the corner of Prince Street. Sports bar chain Yard House is going to 10 Times Square, while Target is opening at Tishman’s at the corner of West 42nd Street and Eighth Avenue.
There is concern, however, about proposals by the City Council to reduce the number of unsightly vacant storefronts. “There is no magic pill or piece of legislation that makes sense,” says Matt Chmielecki of CBRE. “They are under the false belief that landlords are incentivized to keep their space vacant. And nothing is further from the truth.”
A self-correction of rents is underway: the Real Estate Board of New York found pricing is still sliding in the majority of the 17 Manhattan retail corridors.
Owners also know they need the stores to succeed. “They recognize they have a vested interest in them doing well,” says Steven Soutendijk of Cushman & Wakefield. “You need to give tenants free rent and pay brokers.”
Berkman adds, “It’s a great time to sit down with landlords who know how to make deals. If you find a space that works for you, you should be able to make one.”
Says Chmielecki, “I don’t get nervous when tenants are submitting below market offers. I get nervous when the phone stops ringing.”
