How Newbury Street Is Looking To Regain The Boston Retail Throne
Inflated rents, space constraints and NIMBYs have tarnished Newbury Street’s retail luster, and developers and business owners are looking to regain their footing.
“The retail turnover is always high here, but recently it’s been fast and drastic,” Select Oyster Bar chef and partner Michael Serpa said. “You see a lot of empty storefronts.”
For decades, Newbury Street has been Boston’s version of Rodeo Drive or Fifth Avenue. Home to some of the biggest names in luxury retail and a variety of see-and-be-seen restaurants, the chic Back Bay street has commanded some of the highest rents in the city. But new development in the Seaport and Fenway, as well as renovations to the nearby Copley Place and Prudential Center malls, have drawn shoppers at all price points away from Newbury.
“I’m seeing the same vacancies now that I saw eight months ago,” C. Talanian Realty Co. Director of Business Development Chris Talanian said. “Rents are high. We’re in a bubble. We’re in a retail bubble.”
The Talanian family owns and manages one of the largest real estate portfolios on Newbury Street. While high demand and low vacancies have kept rents in most of Boston’s retail areas stable, Newbury Street has been a notable exception.
There are more than 25 properties with availabilities along Newbury, and average rents along the retail corridor dropped nearly 15% from a peak of $103/SF in 2015 to the current $88/SF, according to CoStar.
"Boston’s retail scene has evolved in recent years," NAI Hunneman Director of Research Liz Berthelette said. "Brands that normally would’ve gone to the city’s traditional retail centers, like Newbury Street, are finding opportunities in new neighborhoods like the Seaport or transformational neighborhoods like Downtown Crossing.”
Boston’s hot real estate cycle is a blessing and a curse for Newbury Street. Building values there increased an average of 29% in 2015 compared to 11% throughout the rest of the city. But commercial property tax rates are based on building values, and the increased tax trickles down to rent. Analysts have tied the empty storefronts to the higher rents, and landlords are looking to win back business.
“We cut our rents,” Talanian said. “We’re renewing at the same rates and putting back on the market at little to no increase.”
As retailers look to emerging shopping destinations, rents have started to come down along Newbury. But that is not necessarily halting the leak. Fast-casual restaurants, entertainment users and clicks-to-bricks tenants have dominated retail this cycle, and many are looking for bigger, build-to-suit spaces over what Newbury’s historic brownstones can provide.
“Restaurateurs on Newbury face several hurdles to open, so you can either go that route, or you can have this brand-new space in Fenway,” Serpa said. “It’s a lot easier and lower in financial risk, but it is drawing talent away from Back Bay.”
The neighborhood is known for its tough historical guidelines and vocal residents. Local organizations have opposed everything from digital signs being too close to the Boston Public Garden to potential shadows a proposed Boston Properties development would cast on neighborhood churches.
Commonwealth Avenue residents have been a roadblock in getting more restaurants on the northern half of Newbury, as they would share an alley. The opposition is enough to deter even the most dedicated of would-be tenants, and there are calls for change to bring in more business.
“There needs to be a streamlining of the review process,” Talanian said. “The neighborhood gets a bite of the apple at zoning, they get a bite of the apple at licensing, a bite at architecture, and they get a fourth bite if the restaurant goes for a liquor license. What the city is going to try to communicate is that opposition is not a death sentence and make it clearer to prospective tenants.”
Despite the vacant storefronts, things are not entirely dire on the fashionable boulevard.
Fast-fashion brands like Uniqlo and Forever 21 have opened on the formerly gritty Massachusetts Avenue end of the street, and the younger clientele keeps restaurants like Sonsie, which has operated on the last block since 1993, as relevant as ever. But like its stretch of Newbury, Sonsie has had to evolve to keep patrons interested.
“It’s a little bit about staying true to the brand while reinventing ourselves to stay relevant to the millennial crowd,” Sonsie General Manager Matt Soutra said. “It’s finding things that are affordable, eye-catching and appealing as well as the things that have Instagrammable quality.”
Newbury Street’s importance as a Boston tourist destination will maintain a certain level of foot traffic, and that could be its saving grace.
A CBRE New England market outlook expects rents to stabilize in 2018. Art galleries that had ventured into the South End and its SoWa district are showing interest in Newbury Street. Back Bay maintains a holiday crowd and foot traffic, unlike SoWa after its seasonal weekly open market closes for the year, Talanian said. Others expect more proactive steps from developers to get more business back to the street.
“Once developers and landlords come around and say, ‘Hey, I’ve been sitting on this empty space and need something to figure it out,’ it’ll work out,” Serpa said.