Broker Roundtable: The Future Of NYC Retail
The real estate community acknowledges that retail is facing a legitimate challenge. In New York City, rents have dropped across 14 of Manhattan’s retail corridors, and retail sales growth across the entire city has declined. But despite the growing number of traditional stores filing for bankruptcy, commercial real estate leaders see opportunity for retailers and landlords to adjust their expectations and embrace new models.
Bisnow hosted a roundtable discussion with five of Eastern Consolidated's top retail brokers — James Famularo, Harris Bulow, Robin Abrams, Joe Robinson and Brad Cohen — to tackle the myths and realities of the retail market in the city that never sleeps.
Bisnow: There's a lot of "the sky is falling" messaging out there in the retail sector. Where do you see the market headed?
Abrams: I don’t think the sky is falling. I do think that brokers, landlords and tenants need to be proactive and smart about making appropriate deals. Certainly more caution is needed, but everything is cyclical. Rents become overly aggressive, tenants pull back and then reengage when rents come down. Tenants who are priced out of certain retail corridors must move to different areas in order to secure affordable space. On the positive side, many online retailers are opening up their first brick-and-mortar stores. Landlords are offering flexible and creative terms, and many are leasing pop-ups for the short term, with the ability to convert to a long-term lease.
Famularo: I never buy into the negative hype. I know that these self-corrections happen every so often and the dust will settle, as it always does. That’s the beauty of New York City. Retailers will have to evolve to provide more engaging store concepts and give consumers a reason to go shopping in-store, but I think they’ll still be fine.
Bisnow: In New York City, which submarkets do you see as offering the most opportunity for retail?
Robinson: In the past few years, East Harlem has seen major development. We are expecting that the proposed East Harlem rezoning will eventually be approved, which could bring up to 3,500 new residential units. As a result, there will be a greater need for amenity-driven retail, like coffee shops and fast-casual restaurants, and of course service retail to accommodate the influx of new residents.
Bulow: We’re seeing very successful pockets in many submarkets with amazing opportunities for retail in Queens. Forest Hills spaces are terrific. It’s an affluent neighborhood and also underserved in regards to retail. Long Island City and Flushing still have room for growth. Elmhurst is also underserved.
Famularo: Second Avenue, particularly with the subway opening last January, is an underserved market. I took a listing up there, and originally dreaded showing the space because there had been constant traffic jams and gridlocks and large holes in the street due to work being done by the MTA. Just anarchy. Now, it’s an entirely new neighborhood. Clean and orderly. I received five offers in the first two weeks I listed a space.
Bisnow: How is e-commerce affecting New York City's retail market?
Cohen: I’d say if you look at the numbers, the internet is not taking away tremendous brick-and-mortar sales. The vast majority of people are still shopping in stores. More New Yorkers, however, are becoming dependent on Amazon, FreshDirect and Delivery.com. As a result, many retailers are setting up warehouse space outside of Manhattan so they can offer same-day delivery within Manhattan.
Abrams: E-commerce is top of mind for everyone in the industry. I’ve always believed the two go hand-in-hand. We’re seeing new and exciting tenants who started with online businesses and are now expanding into brick-and-mortar.
Famularo: I think e-commerce has had a huge impact on retail, much like the vinyl record industry overnight changed to CDs and then to music files. Fashion is taking a beating due to e-commerce, but other industries will take their place. Hybrid retail is also definitely taking over. At a place like Surf’s Apparel on Crosby Street, you can sip a cappuccino and go shopping for surfboards and surfing gear.
Bisnow: What's the most interesting deal you're working on or have recently worked on? Why?
Abrams: Our most interesting deals are for several e-commerce retailers that are each doing their first brick-and-mortar stores. They’re bringing in lots of really creative and exciting new brand concepts in keeping with the rise of experiential retail.
Robinson: A couple of deals come to mind. We recently leased a space on a side street in Chelsea on West 17th Street to Naoki, a Japanese restaurant operated by the New York affiliate of Create Restaurant Holdings Inc. The restaurant has been generating rave reviews since opening a few weeks ago.
Famularo: We just arranged a lease at 62 Grand St. in SoHo for celebrity tattoo artist Bang Bang, whose clients include Rihanna, LeBron James, Katy Perry, Miley Cyrus and Justin Bieber. This deal proves that social media is playing a greater role in the real estate industry today because we got this lead through Snapchat.
Bisnow: Are you seeing a shift in the types of tenants occupying space these days? What trends are gaining traction in terms of the types of occupants?
Cohen: Experiential retailers are the ones finding success in today’s market. We’re working on an ax-throwing concept where people will come in and drink while also throwing axes. The trend is toward the clicks-to-bricks phenomena, in which online retailers are taking retail space. They have so much demographic information about their customers that they’re able to be extremely savvy in their site selection.
Bulow: There are a lot of signs that we have to watch in the next two years. I do think we will be just fine. We always are.
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