The Innovators: FlagshipRTL
In this series, Bisnow highlights people and companies pushing the commercial real estate industry forward in myriad ways. Click here to read Q&As with all the innovators Bisnow has interviewed so far.
While consumers turned to e-commerce at an unprecedented rate over the past year, Justin Abrams has been working to bring brick-and-mortar retail into a new era.
Abrams has a degree in cello, but the resident of Manhattan's Upper West Side spent the first several years of his professional life in marketing for energy drink company Red Bull. That experience gave him a different way of looking at retail's real estate problem.
As he walked through New York City, he saw storefronts, once the Big Apple's vibrancy, vacant for years. It didn't make sense to him, he said, and he thought there must be a way to fill these spaces.
“When I was at Red Bull, our secret sauce for marketing was experiential marketing, which means winning the hearts and minds of consumers in person,” he said. “For most of the brands out there, physical retail is their in-person element, and so it made no sense to me why these spaces should be vacant. So we dug into the problem.”
Abrams then went on what he calls a listening tour, speaking to top landlords, brokers and retailers. As a result, in 2019, he launched FlagshipRTL, a company that uses consumer-driven data to match retailers with landlords.
After matching retailers to storefronts, the company and the retailer sign coterminous short-term leases for anywhere between three and 12 months. Retailers then have the option to sign a permanent lease once the short-term lease is over. The company has worked with major landlords such as Brookfield Properties, brokerages such as Ripco, and retailers such as Moncler and Bonpoint.
Since the coronavirus pandemic hit, the company has focused on luxury retail and opened over a dozen storefronts in New York, California, Illinois, Florida, Washington, D.C., Colorado, New Jersey and Ontario. This year, it is set to open over 50 storefronts.
With $3.5M in investment capital to date, the company’s revenue has grown 50% month-over-month between last June and this April, Abrams said. As the recovery unfolds, FlagshipRTL is poised to help retailers dip their toes back into the market and helps landlords fill vacant spaces — potentially setting the two parties up for long-term marriages.
This interview has been edited and condensed for clarity.
Bisnow: How did you come to start FlagshipRTL? What led you down this path?
Abrams: It was very clear that there were mismatched incentives between landlords and brands. Landlords' customers is really the bank that gives them the financing a lot of the time. Brands these days, they want to test everything that they do. In digital, you can do that. In e-commerce, you can do that. If an advertisement that you're testing digitally is working for you, you'll very quickly understand what the metrics are, and you can scale that up. And if it's not, you can kind of lose.
Physical retail is quite the opposite: You have a five- or 10-year commitment, and if you mess up, there's no turning off the ads. You're stuck in it for five or 10 years. I knew that there had to be a better way. We basically wanted to fix that entire ecosystem and create a flexible model for physical retail. One that was flexible, scalable and measurable … and those are the three pillars of Flagship.
Bisnow: So about a year after you get your business off the ground, the pandemic hits and a lot of the country shuts down. What conversations were you having about the future of your business at that moment?
Abrams: In May 2020, I remember having a call with one of my best friends, who's a very successful entrepreneur. He said in times of crisis, go an inch wide and a mile deep, which just means be really focused and hammer down on that focus. So the question I had to ask myself is where's the opportunity and how can we be laser-focused on nailing that opportunity? For us, that was the luxury category. Luxury can’t only exist online. It's really hard to sell a $5K dress if you can touch and try to feel it or have that experience.
We were generating momentum when we had no idea when lockdowns were going to lift or when the next door could possibly be open. But we knew that there was a sector that needed physical retail and there were markets that were going to benefit from Covid; that's actually where we ultimately ended up opening stores. We opened in the Hamptons, we opened in Greenwich, Connecticut. Instead of New York City, we opened in Short Hills, New Jersey. Instead of Chicago, we opened in Oak Brook.
Bisnow: How has the shifting landscape of retail amid the pandemic contributed to your expansion?
Abrams: It's very cliché right now, but Covid accelerated everything. It’s accelerated brands adapting to a more agile model for physical retail. So many of the brands out there that had leases were completely burned by the pandemic. They felt the pain points of what traditional physical retail is to a pretty high degree. So they're all adapting for a more agile way.
Landlords are more open and receptive than ever. The vacancy rate has climbed. They're not getting the same type of engagement that they did 10 years ago, and so they also need to adapt to a model that's progressive. And then I'd say the pandemic, again, just keeping people cooped up. There's this pent-up demand for being out in the real world. So those are kind of the three momentum drivers.
Bisnow: What are these key pain points on both sides of the equation?
Abrams: For landlords, they get financing from banks that require them to get a fixed rent at a certain rate for a certain period of time. That's the only way that they're going to make their capital stack work. So that's why, a lot of the time, landlords have left their spaces empty rather than fill them with somebody who wants something more flexible.
Data-driven site selection is something that was really missing from the equation, actually, on both sides. Landlords need a turnkey partner that understands what their long-term needs are, that can bring vetted tenants to them, that are using data to put tenants in the right locations so that they're ultimately successful.
In the end, they want long-term, successful tenants with good partners, so that's what we do. On the brand side, they need to figure out where to go, how many stores to have; otherwise, it's just a shot in the dark. Once we actually make that decision, they need a try-before-you-buy leasing model. They can't just jump into a five- or 10-year commitment. They need flexibility, they need an end-to-end set of tools.
Bisnow: So many retail businesses have closed over the last year. Has this made it easier for you to find your own spaces?
Abrams: So what I'd say is a lot of spaces have closed, so there's a lot of inventory that's quite turnkey. Entering a space isn't as expensive as it used to be. There are a lot of spaces that have recently been vacated and brands were able to get in there and we're entering somewhat turnkey space. So that's been a positive.
Bisnow: Have the conversations with landlords shifted this spring as your recovery starts to take shape?
Abrams: We're looking to expand upon the success that we had throughout the pandemic. I’d say we’re having very progressive conversations of how can we do more of this? How can we duplicate this? How can we do more faster? So it's been really progressive. Landlords are ready to get their spaces filled. So they've been open arms.
Bisnow: You have several big-name commercial real estate partners. Are you in mall spaces or on high street spaces?
Abrams: To be honest, when we start working with brands, we look at the data, we figure out where they should be: Where's their lowest-hanging-fruit customer? Where are they going to be successful? So I never go to landlords and say, “Hey, which spaces do you have, we're going to go out and fill these for you.” They know that when we come to them, we have a match as data-driven, we know brands going to be successful there. And I think that's our value.
A lot of the time, that's pointing to mall locations, a lot of the time is pointing to lifestyle centers, a lot of the time it's to high street.
So we don't categorize mall inventory and say, the mall is dying. We don't categorize high street and say that's the only place that a brand's going to do well. We look at the data, and we get an understanding of the deal terms. And if a brand has a customer there and the deal is right, then it's a good fit. And when those two things align, no matter where it is, we put the brand there.
Bisnow: Can you tell me a little bit about the data that you have compiled to make the educated decisions and connect landlords to potential tenants?
Abrams: Yeah, so high level, we really look at our relationships with brands and partnerships. We sync up with them, we understand their historical store performances, we understand what their most powerful econ ZIP codes are. We understand aspirational, wholesale markets.
Then we're looking at real-time data. How's the foot traffic trending in specific markets? What are the income brackets and demographics of customers in a specific market? So there really are more data points available than ever that brands have access to, that exists out in the ether. What's unique about Flagship is that we take a real-time approach. We want to see how markets performed in the last 30, 60, 90 days. Looking at things like live mobile foot traffic trends are a big part of that.
Bisnow: What is next for Flagship?
Abrams: Our brand partners are having a lot of success in locations that we've launched already. So they're expanding a lot. A lot of new brands in the pipeline for this coming year. Right now we're in the U.S. and Canada, we will eventually make our way to Europe. Asia has been incredibly, incredibly progressive. So we’ll eventually be there as well.
The role of physical retail has changed globally. It's a global fundamental difference. The role of physical retail has changed, and that's why you're not just seeing it in major cities, you're seeing it in small pockets and suburbs. So it's a global problem, which means that hopefully, it's something that we can continue to deliver value in globally.
CORRECTION, MAY 5, 1 P.M. ET: A previous version of this story did not specify FlagshipRTL's growth figure between last June and this April was month-over-month. The story has been updated.