The rising impact of e-commerce means that property owners need to re-examine some of the core tenets of the retail sector, according to panelists at a BisNow conference in New York last week. “Retail is not brain surgery. I don’t want to hear any negativity – if you want to hear negativity, get an accountant,” said Faith Hope Consolo, chairman at Douglas Elliman Real Estate, who believes that New York can provide a roadmap for other urban retail markets. “New York launched a president. I think we can relaunch retail.”
Many new projects with retail components are in the works throughout the five boroughs. Extell’s City Point in downtown Brooklyn is a mixed-use 59-story tower with 500,000 square feet of retail including Century 21, Target, and Trader Joe’s. Consolo, however, noted that investors are moving beyond Brooklyn. “The boroughs are on fire. Sorry, Brooklyn, it’s looking like the Bronx this year,” she said.
Manhattan is also seeing substantial development, including Essex Crossing at Delancey Street on the Lower East Side. The site will include a 14-screen Regal Cinema, a Planet Fitness, and an NYU Medical Center. “Retail opportunities are going from 30,000 to 50,000 square feet,” said Rohan Mehra, principal at The Prusik Group. “The development includes a three-block market with 150 vendors, with 60% of the affordable housing being built in phase one of the development.”
Across the Hudson River, Triple Five is building the long-delayed The American Dream in New Jersey, a supermall that will include 3.1m square feet in the first phase, and will be more than six million square feet when finally completed in fall 2018. “This development will be 50% entertainment,” said Sandi Danick, senior v.p. at Triple Five. The property will include an indoor water park, an ice rink, a movie theater, mini golf, a snow park, two food halls and a dining terrace. The development is 74% preleased, with tenants including DreamWorks, Saks Fifth Avenue, H&M, Zara, Burton, Rossignol, and Spyder.
This kind of experience is something that’s proving to be increasingly important to attracting users to retail space. Landlords have begun to write into retail tenant leases that they must do something experiential, Danick said. “Bonobos and Warby Parker are seeing the biggest growth – their employees are so much stronger than the average retailer,” she added.
Food is one area where it’s easy for a landlord to stand out. “Food became fashion – this for me is a shopportunity,” Consolo said. “Food halls with shorter-term leases offer a lot of flexibility. In this challenging market, we need to think about other uses [for space].”
Broadly speaking, more regional tenants are flooding into CBDs nationwide, particularly in New York. “There are a tremendous number of retailers on the hunt in New York City,” said Samuel Polese, executive v.p. at Thor Equities. “The more phone calls you make, you’ll find that tenant coming from Europe or South America.”
Landlords are also beginning to recognize that most of their tenant’s earnings come from online sales, and that is being reflected in the rent, added Ken Bernstein, president and ceo of Acadia Realty Trust. When a retailer opens a store in a new market, often they’ll initially see a dip in online sales for that geographic location, but after a while it stabilizes, noted David Rabinowitz, director and co-chair of Goulston & Storrs.