There’s good news and bad news for New York City retail. While “for rent” signs proliferate on shop windows and asking rents drop in some parts of Manhattan, brokers report activity picking up in other neighborhoods both on and off the island.
First, the good: The boroughs are a safe bet for retailers. And on the plus side for owners, sites in Queens and Staten Island are seeing new projects, and are not experiencing the rent pullbacks seen in Manhattan’s priciest districts.
Those still-hot Manhattan areas include Hudson Yards and the Financial District. The coming Essex Crossing megaproject on the Lower East Side is also getting a big boost with a Target, new hotels and restaurants on the way. “[Retail] is still very strong, and people want to touch and feel and try everything,” says Robert K. Futterman, CEO of RKF, of customer behavior in brick-and-mortar stores.
Elsewhere, not all parts of Manhattan are lagging. In the Meatpacking District, Aurora Capital Associates and William Gottlieb Real Estate are redeveloping a portion of Gansevoort Street where both Pastis and Hermès have already secured spaces.
The asking rents on the ground floor of one stretch, 46-74 Gansevoort St. at the corner of Washington Street, range from $500 to $650 per foot with upper floors “in the triple digits.”
With the rare opportunity to merchandise a block, the development team wants to “create something interesting,” says Joel Isaacs of Isaacs and Company, who is representing the owners. A beautiful second-floor space with an outdoor area is expected to attract a special brand.
One farther-flung area gaining new projects is Staten Island. Here, Faith Hope Consolo, chairman of retail for Douglas Elliman, is representing Empire Outlets, a complex under construction by the ferry terminal which will have stores and eateries along with an artisanal food hall.
“It’s a new main street on the harbor. There will be a sense of place and entertainment — and you don’t have to go far,” says Consolo, adding that the site is convenient by ferry from Manhattan and by car for those in Brooklyn, Long Island and New Jersey.
“Everybody wants a bargain,” she says. “And you will have the wheel.” An added lure is a 630-foot-tall Ferris wheel with panoramic views of the city akin to the London Eye.
Across the water, Long Island City in Queens is also experiencing a construction boom. It has a new Aloft hotel — funky, trendy and colorful, as that Starwood brand is known to be — plus a whopping 36 hotels on the way. Not to mention the neighborhood has an existing 12,000 apartments and another 22,000 units coming online in the next two years alone, making it a bright spot for future retail growth.
“That’s a lot of people that have to be serviced,” says Dean Rosenzweig, senior vice president of CBRE. He adds that quick-service restaurants, known in the industry as QSRs, are on the hunt for locations.
Starbucks has already rented in Long Island City, while Western Queens’ first Chipotle is open at 26-16 Jackson Ave. Other retailers, from wine shops to pharmacies and banks, are going on site visits in the area.
Many young professionals — some with kids — live in the Queens Plaza area but work in Manhattan. They pump life and bucks into the retailers before and after work.
“We are already consulting on new big-box store locations,” says Aaron Fishbein, director of Winick Realty Group. “Residents are currently waiting to buy a cup of coffee, and retailers want to lock in [lower] rents and not miss out like they did in Williamsburg [in Brooklyn].”
Rents are now $65 to $75 per foot for mid-block locations, while corners can go for up to $75 to $100 per foot.
Long Island City “is definitely underretailed, and has such a long way to go in terms of getting the services to meet the level of residential that’s already there,” says Peter Braus, managing principal of Lee & Associates NYC. “Never mind what is coming — and the office tenants!”
That’s right, the Queens powerhouse ’hood also has 7 million square feet of office space filled with tenants such as JetBlue and the city’s Department of Health. That means patrons for local businesses during the day.
Tishman Speyer is also building another 1.1 million square feet of offices that will include WeWork. “That dynamic really allows the area to explode,” says Rosenzweig.
That said, across the board, retailers are feeling crunched by competition from e-commerce. Plus, consumers are spending less overall — and there are fewer tourists.
“Everyone’s first instinct is to get on a computer and not run out to a store,” says Braus. “Retail is in a pitched battle to get [your money].”
The most successful retailers will integrate online sales with brick-and-mortar stores, predicts Susan Kurland, executive vice president and cohead of global retail services at Savills Studley. Beyond ordering online and returning in a store, customers can also pick up merchandise purchased online in real life.
Consumers also expect shops to be unique.
“You don’t want to walk into your grandmother’s store,” says Jeffrey Roseman, executive vice president of Newmark Grubb Knight Frank’s retail division. “A lot [of stores] are tired and boring and unexciting. That’s the new challenge, and the ones that are doing it right will do business.”
Some retail deals are getting done, especially for restaurants — as Roseman quips, “You can’t eat a sandwich on the Internet.” Some retailers are strategizing simply by adding dining outlets or food to their stores, adds Futterman.
Hard times mean affordable rents. “Every landlord is giving cash incentives to build, which is very unusual and a new paradigm of leasing,” says Joanne Podell, vice chairman, Cushman & Wakefield. “The landlords previously just delivered the space — and that was it.”
Owners had priced retail rents too high, so buildings lost tenants. “Now they are starting to feel the pain and have empty stores,” said Greg Kraut, a partner with K Property Group.
Take the beautiful Scribner Building — at 597 Fifth Ave. — where Sephora recently closed.
Nevertheless, says Richard Hodos, vice chairman at CBRE, “New York will always be perceived as a shopping mecca.”