As retail rents in Manhattan tumble, retailers are seizing the moment to open up shop in previously out-of-reach neighborhoods, such as SoHo or the Upper East Side.
As retail rents hurtle toward five-year lows, retailers who a year ago could only dream of locations in trendy SoHo or the wealthy Upper East Side are seizing the moment to open up shop.
These opportunistic retailers, ranging from mom-and-pops to thrift stores to so-called pop-up shops, are taking advantage of rents that fell an average of 11% between fall 2008 and spring 2009. SoHo/NoLIta is expected to see the biggest drop this year—20%. Other neighborhoods are headed for declines of as much as 18%.
Pop-up shops founded under shorter leases lasting anywhere from one month to two years. They give retailers a chance to test concepts—often with recession-related hooks—in an extremely uncertain retail environment. At the same time, they enable landlords to get rent on space that might otherwise sit empty, without agreeing to a long-term lease at a vastly decreased price.
“The rents may come up slowly, but it’s still an enticement for people to lease stores,” said ROXANNE BETESH, senior managing director at Sinvin Realty.
Shoe store Camper recently signed a one-year lease on Madison Avenue at 59th Street for around $500 a square foot, according to Faith Hope Consolo, chairman of the retail division of Prudential Douglas Elliman.
“It’s a combination of the retail environment and the availability of so much space,” said Ms. Consolo. “Pop-up stores are trying to turn the retail around.”
Fashion design company Comme des Garçon recently leased space in the Meatpacking District for two years. The new spot will house a pop-up of its Black apparel collection, a more affordable line designed to appeal to price-savvy shoppers and last only as long as the recession.
Opportunistic retailers are aiding a handful of neighborhoods, especially those that were well-established. With rents down on some side streets by more than 50%, trendy SoHo is seeing its share. Earlier this year, LA-based Flight Club, a limited-edition sneaker store, leased its third Manhattan outpost on Lafayette Street for only $70 a square foot—a steal compared with the $200 a square foot price the space would have fetched last year, according to brokers.
SoHo is home to shopping destinations including Bloomingdale’s Hollister and now Topshop. Neighborhoods without similar anchors aren’t as attractive to the new retail players, which can afford to be picky. Though NoLIta rents have fallen over 20% to $100 a square foot, few retailers are lining up to reap the benefits. Adding to the vacancies, the area has lost several boutiques, including Camilla Staerk, Femmegems and Sweet Tater, within the last few months.
“This can be a good time for people who are starting,” said Christina Kornilakis, who closed vintage shop Sweet Tater in April. “But our business was significantly down. We didn’t see regular customers.”
Vintage is out. Second-hand is in. Shortly after launching in TriBeCa, local thrift shop Housing Works, a nonprofit whose proceeds go toward helping low-income people with HIV and AIDS, recently opened its ninth retail location on Crosby Street in SoHo.
It’s not only the rents that have fallen. Other chains that came to New York prepared to spend big-time dollars to carve a place in the city are now taking advantage of lower prices for everything.
Israeli ice cream maker Screme, which entered the New York market last year, recently signed two more leases, one for a 1,600-square-foot space on East 64th Street at only $90 a square foot.
“It’s not just the rent, it’s everything,” said Mr. Levy, explaining that he can get deals from architects and contractors for outfitting the shops.