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Short-Term Stores Now a Permanent Fixture in New York Retail

Just a few years ago, landlords likely would have turned away retailers looking for shorter leases in favor of tenants willing to hunker down for a decade or longer. But times are changing, and short-term tenants are becoming more common even in New York’s swankiest retail corridors.
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Keiko Morris

When Alana Branston and Ali Kriegsman wanted a short-term location to test Bulletin, a retail format that provides shop space for entrepreneurs, they set their sights high, first in Williamsburg, Brooklyn, then Manhattan’s Nolita neighborhood and now the Flatiron District.

Just a few years ago, landlords likely would have turned away this young retail business in favor of a tenant willing to hunker down for a decade or longer.

But times are changing, and short-term tenants are becoming more common even in New York’s swankiest retail corridors.

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Bulletin is “a newer concept that needed the freedom to test different things,” said Ms. Branston, Bulletin’s chief executive. “It was a pretty simple process, and we had a lot of options.”

Bulletin, which now has leased the shop spaces in Williamsburg and Nolita for terms under six years, is among the retailers discovering that once-rare short-term deals are easier to find. Landlords like them because they help bridge gaps between longer-term tenants, help market the space and could lead to a longer-term deal with a short-term tenant. Retailers like them because they offer freedom to test concepts without locking into long-term commitments.

“There is a space between the old retail model and the new model, and in that space people are trying to figure out what they are doing,” said Robin Zendell, a broker and chief executive of real estate services firm Robin Zendell & Associates. “That means temporary stores to test concepts and markets are the only way to go if you are unsure.”

Deals for retail space with terms of less than three years made up about 20% of all Manhattan retail lease transactions in the third quarter, compared with less than 5% in the same period last year, according to real estate services firm CBRE Group Inc.

Landlords increasingly are willing to take shorter-term tenants as vacancies rise. There were 197 available ground-floor spaces in Manhattan’s prime corridors in the third quarter, down from a peak of 212 in the first quarter but well above the 152 in the second quarter of 2016, according to CBRE.

People listen to CDs on wall-mounted CD players in Bulletin.Photo: Mark Kauzlarich for The Wall Street Journal

“It’s a way for the landlord to get cash flow for a period of time, when a store is vacant,” said Richard Hodos, a CBRE vice chairman. “It doesn’t make the landlord rich; it doesn’t kill the retailers and it makes everyone happy.”

The retail shake-up has given rise to online services such as Appear Here, a website that allows merchants to search for short-term space, set up viewing and even sign agreements.

The company is working with larger landlords such as Brookfield Property Partners and Simon Property Group Inc., which are looking for ways to drive shopping traffic to their centers, said Elizabeth Layne, chief marketing officer for Appear Here. The company launched its New York operation this spring and now lists about 300 retail spaces for the area.

“There is a new type of venture-backed brand looking to test retail in a different way,” Ms. Layne said. “They are using [brick-and-mortar] retail to build brand awareness and acquire new customers.”

Luxury women’s apparel brand Cushnie Et Ochs was able to refine its concept for its first permanent store in Manhattan with a three-month pop-up shop at Cadillac House at 330 Hudson St., said Cushnie Chief Executive Peter Arnold. The company was selected as part of a program by the Council of Fashion Designers of America Inc. and Cadillac, and the experiment helped prove to the board that it was ready to launch its own retail concept.

But Cushnie is still cautious and is close to negotiating a deal that likely will be less than a seven-year term, with options to extend the lease, Mr. Arnold said.

“There are a couple of luxury brands who, years ago, spent a lot of money to build out the ideal store, and it wasn’t supportable in terms of sales,” Mr. Arnold said. “Those are cautionary examples.”

Bulletin, which provides shop space for entrepreneurs, has been able to find shorter-term leases.Photo: Mark Kauzlarich for The Wall Street Journal

The traditional long-term lease deal is far from dead. Developers of shopping centers such as Hudson Yards, The Shops at Columbus Circle, Brookfield Place and the Turnstyle Underground Market in the Columbus Circle subway concourse all said they are signing long-term deals. But they also are using temporary, flexible units and shorter-term spaces to bring in new concepts.

Susan Fine, principal of Turnstyle, purposely reserves some spaces for three-year deals so she can keep the market fresh.

“Part of leaving home and going shopping has to be the incentive to discover something new,” Ms. Fine said.

Write to Keiko Morris at Keiko.Morris@wsj.com

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