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Brooklyn Developers Choosing Coolness Over Credit For Their Retail Spaces

Brooklyn has grown into a national sensation thanks to its hipster aesthetic and personality, and local retail has been at the forefront of that growth. Waves of new construction could threaten the borough's trademark authenticity, but the landlords opening these major projects are aware they risk losing brand cachet if they seek out national credit tenants rather than buzzy brands.

The intersection of Bedford Avenue and North 7 St. in Williamsburg, Brooklyn
The intersection of Bedford Avenue and North 7 St. in Williamsburg, Brooklyn

There are tens of thousands of apartments and millions of square feet of offices under construction in Brooklyn right now, concentrated in hot spots like Williamsburg, Greenpoint and Bushwick. For retailers, it is an easy sell — guaranteed foot traffic from a population with disposable income — but not as easy to sell the residents on the retailers.

"People want an authentic Brooklyn experience," Lee & Associates Brooklyn Retail Director Jaime Schultz said. "Retailers can't just open a standard, cookie-cutter concept here. [Developers] want to go get the real deal, Brooklyn tenants who can be my anchor and be my story that says, 'I want to elaborate on the Brooklyn neighborhood.'"

That can still mean bringing in a national tenant, Schultz said, but it has to be the right fit. For Brooklyn, that means a first-of-its-kind concept. Adidas opened up a location in Greenpoint, but rather than just selling shoes and gear, it rented out a former industrial building and opened what it called its Brooklyn Creator Farm. Also in Greenpoint, skater shoe company Vans has a House of Vans event space, another concept aimed more at branding than sales.

Even car companies like BMW use Brooklyn spaces to build unique concepts, rather that a standard showroom, Schultz said. BMW, and its subsidiary, Mini, opened A/D/O in Greenpoint as a design incubator.

"A lot of first concepts from national retailers are being done in this neighborhood," Schultz said.

The new concepts have largely taken over old warehouse space, a key aesthetic for keeping the Brooklyn brand, which traditionally does not mean stylish spaces in new construction. 

Schultz leads the leasing for Two Trees Management's Domino Sugar factory redevelopment, including the first building to open at 325 Kent Ave. On the ground floor there is a Brooklyn native anchor, Mekelburg's. The shop was founded in Clinton Hill, Brooklyn, in 2015, and will occupy 4K SF. In most of the country, a two-year-old business that focuses on specialty food and craft beer would not be considered an anchor. But Brooklyn is different, Schultz said. 

Site E at Domino Sugar, 325 Kent Ave.
325 Kent Ave. in the Domino Sugar development

"They want that vibe, they want that feeling of this is a cool, local Brooklyn tenant that is going to bring a great amenity to my residential base," Schultz said of Two Trees' appetite for Mekelburg's. "It’s not some outsider. We’re nurturing from within."

Schultz is also part of the leasing team at 25 Kent Ave., where there will be more than 100K SF of retail and light manufacturing space. At a project like that, anchoring 400K SF of offices on the upper floors, Schultz said the strategy is more to go after national retailers like Nike and Amazon, which fit better in Williamsburg's commercial and entertainment center. She said the development could also attract an entertainment concept such as a new movie theater.

"We’re hoping to create something that’s elevated and stands apart," she said. "If people are coming here for their offices, they’re coming to be the first of their kind. If you’re a pioneer and an innovator, the retail needs to reflect that amenity to base people."

Brooklyn's culture might help it benefit from the broader crisis in the retail industry. Its bread-and-butter businesses are the local, quirky shops that figure to benefit from consolidation among major department stores and retailers struggling to make a profit, Schultz said. They are also benefiting from landlords feeling anxiety about filling their vacant ground floors.

"I feel like there’s a shift from older institutional retail, which is not doing well. They don’t bring the same type of baggage as the guys who have been around forever and haven’t evolved," Schultz said. "I think they’re taking advantage of the fear that landlords have. They’re getting more support from landlords to open up these shops."

Support from landlords means forgiving tenants for not coming equipped with AAA credit rating, instead pushing for highly rated brand equity, Guesst co-founder Jay Norris said. Landlords are balking at bringing a Starbucks to their project, instead opting for brands like Blue Bottle Coffee or Gorilla Coffee.

"They have the right financials in place that give you cultural currency instantly when they go in, and they pay the rent," Norris said. "You have to think about how to fully nourish the neighborhood."

Hear Schultz, Norris and others discuss New York's trendiest borough at 7:30 a.m. Thursday at 41 Flatbush Ave. for the Brooklyn State of the Market.