Creative brands are seizing opportunities in repriced storefront spaces.
Despite worries of retail doom and gloom, stabilizing rents along the city’s “high street” markets are putting store leases — now with brand-friendly pricing — back in play. According to Cushman & Wakefield, rents dropped in seven of 11 market strips at the end of 2019’s third quarter, paving the way for leasing velocity to rise 12.3 percent.
Nascent labels are eager to take advantage of the retail reset to test their online concepts in real life via pop-ups and longer deals. The opening of Nordstrom at 225 W. 57th St. last week is poised to invigorate Billionaires’ Row the way Neiman Marcus at Hudson Yards did to the West Side. And shops with “experiential” elements that accommodate social media-savvy consumer behavior have continued to blossom.
The Upper East Side of Manhattan was the most active neighborhood with 21 leases signed. Herald Square and Madison Avenue each saw 13 leases inked, with rents for the latter dropping to $927 per foot from $1,226 per foot just a year ago.
Jason Pruger of Newmark Knight Frank points to the strong retail markets on the eastern edges of the UES boosted by the Second Avenue subway extension.
Pruger represented the Shade Store in an Upper East Side deal at 1340 Third Ave. near 77th Street. “It’s a more service-oriented store, but the rents made sense,” he says. (A much-anticipated Target just opened at 1201 Third Ave. at 70th Street.)
In the Flatiron District, Pruger says, “the demographics and traffic are solid and the rent is now reset for profitability.”
Restoration Hardware’s former location at 935 Broadway by 22nd Street — right behind the Flatiron Building — is set to host a Harry Potter exhibit, leased through Laura Pomerantz at Cushman & Wakefield.
Downtown, continued residential development around City Hall is leading to deals such as the Whole Foods coming to 1 Wall St.
“You have density with residential, tourists and offices — and that’s a recipe that works for retailers,” Pruger says.
The same could be said for Whole Foods’ new 60,000-square-foot deal at 63 Madison Ave. in Nomad, which has a similar mix of passersby. On Fifth Avenue between 42nd and 49th streets, deals were inked with Club Monaco at 597 Fifth and Ugg at 530 Fifth, bringing availability down 10 percentage points to 16.1 percent.
A new boutique building at 112 Seventh Ave. will become a Chelsea flagship for Winnipeg, Canada-based furniture firm EQ3. Developed by Aurora Capital, A&H Acquisition and Extell, it will house basketball star Kevin Durant’s company, Thirty Five Ventures, in offices and a roof deck space above the store. The retail asking rent there was $400 per foot.
“It’s important for owners to look at the retail/office balance to create holistic programming,” says Whitney Arcaro of RXR.
In Soho, average asking rents have dropped 13.9 percent from just a year ago to $359 per foot — the lowest rents since 2012.
Nascent labels are eager to take advantage of the retail reset to test their online concepts in real life via pop-ups and longer deals.
Along Broadway in Soho, there are 47 stores available, Cushman & Wakefield says, but many aren’t vacant because they are housing pop-up shops or tenants seeking to sublease. At 12 percent, Soho also has the highest availability of the retail markets.
“At the appropriate level of rent, retailers can make these ‘high streets’ work,” says Jared Epstein of Aurora Capital, which owns and develops retail buildings.
With such reduced rents, the colorful and creative Museum of Ice Cream was able to lease the 25,000-square-foot former H&M space at 558 Broadway, where it will open on Dec. 14 after a prior pop-up.
The museum was represented by Brandon Charnas and Adam Henick of Current Real Estate Advisors, a firm that markets their retail clients via Instagram posts.
Interest in the museum itself — and other snazzy stores like Glossier’s outpost on Lafayette Street — is fueled by the wave of now-required Instagram-worthy backdrops for social media posts. The parade of clicks to bricks is continuing now that internet-born brands recognize that stores boost sales. (Charnas’ wife Arielle, who is an Instagram fashion star, will open a shop for her own lifestyle brand, Something Navy, next year.)
“There’s finally a queue of these millennial brands, which have been created through the prominence of social media, that are starting to do brick and mortar,” says Epstein.
He points to Rockets of Awesome, an online children’s emporium founded by New Yorker Rachel Blumenthal. The company leased a pop-up store through December at 133 Fifth Ave. near the Flatiron Building. “It was a cool company I had never heard of, but my wife buys their kids’ apparel online,” Epstein says. “Now there are lines out the door.”
Another clicks-to-bricks example is LoveShackFancy. Dreamed up in 2013 by West Village fashion editor Rebecca Hessel Cohen, the bohemian- and vintage-inspired women’s brand first attracted devotees online. It is now open at 390 Bleecker St.