NY Retail Is About To Explode
Within a year, the largest amount of retail ever curated from scratch in Manhattan will open Downtown. (It's so much tastier than frozen retail.) Here's what to expect there and in other retail hotspots, according to speakers at Bisnow's NY Retail Real Estate Summit last week.
We snapped Lacoste CEO Francis Pierrel (right, with Arent Fox’s Tony Lupo). The 80-year-old brand, under family ownership for 79, is getting some freshening up. It’s angling to become a lifestyle company. New tagline: Life is a beautiful sport. Francis is a pragmatist, stating that retailers need to go where consumers want to go. That no longer means locating somewhere they just go for the purpose of shopping, he says; rather, put stores where they spend their spare time, he says, pointing to entertainment destinations that draw people, transportation hubs, anywhere shopping will be part of the experience.
The jacket of the unknown networker, at Equity Office's 5 Bryant Park. Francis previously was CEO of Lacoste France, but he’s all for US consumers. He suggests an experiment: Ask someone anywhere in the world the name of the president of China; after the crickets subside, ask the name of the president of the United States. Not only will that person know the answer, they'll know his wife, and they'll know what she wore yesterday, Francis says. So yeah, “Fifth Avenue has a future.”
Crown Acquisitions president Isaac Chera (left, with AKF Group’s Stephen Copeland, who—we’re just gonna say it—bears a striking resemblance to Dr. Drew) says retailers are growing in every sector, from luxury to big boxes and even smaller operations like CityMD and SoulCycle. (We usually need the former after working out at the latter.) NYC deals are easier to sell and lease, says Stephen, because the city’s infrastructure already is ripe.
DLC Management CEO Adam Ifshin (with Forest City Ratner’s Kathy Welch) says there’s virtually no cap rate on retail property sales here. Rather, it’s all about what value an investor can add to the property. The question is where cap rates will be when it’s time for those buyers to sell. He wonders whether they can they get comfy with that equity risk. Isaac has heard murmurs of a Fifth Avenue retail deal near $4,000/SF closing soon. Six months ago, landlords dreamed of $3,000/SF rents, and now it’s achievable. Retail rents in Brooklyn, too, have doubled. But Kathy expects an NYC-wide correction this year or next. Federal Realty Investment Trust Northeast head John Hendrickson predicts that retailers' growth, too, will stop in 2015 after a stellar performance in '13 and '14.
A whole new world of retail is coming to Downtown, says Brookfield national retail leasing head Ed Hogan (with Eastern Consolidated’s Alex Hill and C&W’s Gene Spiegelman), with 500k SF opening within a year among his company’s revamped Brookfield Place, Westfield’s World Trade Center and Fulton Transit Center, and Howard Hughes’ South Street Seaport. Never before has there been an opportunity to curate that much retail in Manhattan, says Westfield’s David Ruddick. “Prepare to be amazed.”
Howard Hughes’ Chris Curry (with our moderator, Goulston & Storrs retail, restaurant, and consumer group co-chair David Rabinowitz) says his company’s redo of the Seaport will embrace the area’s historical significance as New York’s original waterfront district.
Gene, meanwhile, says the Far West Side is the future of retail, and Ed notes that the density there will make the Empire State Building look like an average-height building. Handler Real Estate Org CEO Scott Galin (right, with CBRE’s Andrew Goldberg) says his company owns some properties just east of Hudson Yards and foot traffic already is rising exponentially along Ninth Avenue in the 30s and 40s. That used to be a weekday submarket, he says, but no longer. Gene also calls 57th Street between Fifth and Columbus the most undervalued retail street in Manhattan.
Last month’s hugely successful (and cuddly) Purina Cat Cafe pop-up at 168 Bowery is an example of experiential retail, and David Ruddick (here with Patton Boggs’ NY retail leasing co-chair Jon Ziefert) expects to see more. Scott says New Yorkers like anything unique; he recalls a 500-person line for Black Seed Bagels, which just opened in Nolita and serves Montreal-style bagels (boiled in honey-infused water instead of regular water). After Wasabi (a fast-service sushi spot that sells by the piece) opened its first US store in Handler’s 501 Seventh Ave in February, Scott says the line was two blocks long for three weeks. (Our theory: People secretly like standing in line and just need the retail so they don't look weird.)
Andrew says the cat cafe was a new way for Purina to reach consumers. Gene adds that NYC often is retailers’ first choice for pop-ups; in fact, many don’t have a second choice. Another new retail opportunity: Millennials number 90 million in the US, says Alex, who launched Eastern Consolidated's retail leasing arm six months ago. Not only do those 16- to 34-year-olds set trends, Alex says, they spend $2.5 trillion a year, translating to hundreds of millions of revenue in NYC.
Whole Foods is a big driver of retail real estate sales in suburban NY and throughout the Northeast. John is selling a Boston shopping center anchored by the grocer, and 90 buyers are chasing it. (What won't people do for organic almond butter?) In fact, Whole Foods’ presence could mean a 100-bps premium on the trade of a traditional shopping center.