New York’s retail brokers are quick to tell skeptics, “Remember the banks?”
It wasn’t so long ago that financial firms locked down every prime corner in America to attract new customers.
But as ATMs became wildly successful, the banks needed fewer tellers and less space, merging with each other and giving up locations. Politicians bemoaned empty storefronts but savvy brokers saw these vacancies as opportunity.
“Retail is a cyclical business,” says Adam Flatto, CEO of the Georgetown Company. “Every seven to 10 years, new concepts are created and others are retired.”
These days, as retailers are reluctant to lease new stores, building owners without financiers on their backs have wised up, dropped asking rents, do more work and are providing longer rent-free periods. In some cases, even lenders are recognizing that some rent coming in is better than none.
“Think about the history of our city and the great recessions. Some of them are much more tragic and terrible. That’s why I think 2017 is a transition year,” says Gene Spiegelman, vice chairman of retail at Cushman & Wakefield. “Great space always gets leased.”
At 519 Broadway, Lee & Associates NYC has a 7,500 square foot store available with an asking rent in the $500s per foot. Its Soho neighborhood has seen average asking rents dive from $977 per square foot in 2015.
“That’s a price at which people knock on your door and want to talk to you,” says Peter Braus, managing principal at Lee of the space in the heavily trafficked shopping area. Similarly, in high-density Kips Bay, Lee brokers are seeing demand for spaces where top rents are in the mere $100s per square foot.
Speaking of the big marquee deals, Braus wonders: What did it take to get these done? “We know this now involves a lot of concessions by the owners,” he says.
Both store owners and brands are being cautious. As Jeffrey Roseman, executive vice president of Newmark Knight Frank Retail, says, “There are no reckless deals and no [retailer] is coming in with unlimited funds to open stores. Everyone is more conservative.”
One thing is clear to the industry: A storefront is only one small part of connecting to a consumer.
“The store[front] should not be driving the strategy,” says Susan Kurland, co-head of global retail services at Savills Studley.
Owners are also figuring out ways to incorporate emerging brands into their projects with kiosks and pop-up…