Shopping Center Business is the leading monthly business magazine for the retail real estate industry.
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NEW YORK CITY 58 • SHOPPING CENTER BUSINESS • December 2017 that have a following that are opening up in New York City," she says. "What's in- teresting about all of the online brands is that they know who their customer is and they know where their sales are. Unlike a bakery, which can only guess because they don't have online stores, online brands can target their locations to serve their needs." "The internet has made opening stores in New York City much more important than it ever was," says Ariel Schuster, vice chairman of RKF. "All of these brands are realizing that opening brick-and-mortar stores helps their online business. It's not an either/or proposition, and for these online brands that we're talking to, they understand the appeal of opening physi- cal locations and that it is a cost-effective way of gaining clients and customers. We're lucky to be working in New York — it's a great time for creative deals." For these brands seeking an entrance into brick-and-mortar retail, pop-ups are becoming a go-to solution. "Pop-up shops are fueling the retail environment," says Consolo of Douglas Elliman. "Brands want to briefly test out their products be- fore opening permanent stores and retail- ers have figured out that the perfect mix of clicks and bricks make for a success story. The brands like the exposure, consumers like the excitement and landlords like the foot traffic created and the chance that the retailers may turn a short-term lease into a long-term opportunity. Pop-ups are everywhere and showcase every type of brand, from high-end to emerging." Consolo also notes experiential retail and food halls are major draws in today's retail environment. "Enhancing the in- store experience and catering to the 'in- stant gratification' crowds is very import- ant," she says. "For example the 'runway to reality' concept where customers can immediately buy in the store what they witnessed on the catwalk. Integrating technology with virtual and augmented reality — where shoppers can touch, see, create and become involved with prod- ucts at an intimate level — is key." Food halls can be seen in most of the up-and-coming developments around New York City, and continue to be the dining du jour for today's consumer. "Ac- cording to the Bureau of Labor Statistics, the number of restaurants is growing at about twice the rate of the population," says Consolo. "Furthermore, since 2010, restaurants have accounted for one out of every seven new jobs. The food scene is booming and is driven by the millennials who spend their money on experiences — and food is an experience. They want convenience and value, as well as an Ins- tagram-worthy picture to share with their followers." Jeff Pandolfo, director of leasing for The Shopping Center Group, notes that food and beverage and entertainment tenants frequently serve as anchors. "The land- scape is changing and the assignments are changing," he says. "Anchors tend to be the active players in the market right now, and that means food and entertainment. Especially for a development project, you need that experiential retail — something that is driving people to the location and creating foot traffic. At Industry City in Brooklyn, there's a significant office pop- ulation, so it's a combination of bringing people to the site from neighborhoods, pulling people from Manhattan and other areas and also serving the office tenants above." Plasky of Marcus & Millichap notes another trend: tenants are downsizing in footprint. "Tenants are looking for smaller spaces, and tenants with larger footprints are shrinking their stores," he says. "You're seeing a proliferation of food, fitness and healthcare tenants, as well as discount stores. Some of the big, slow-moving companies are going by the wayside and it's becoming more difficult to sell retail properties right now. The properties that are still selling for top dollar are multi-tenant, neighborhood- and community-based retail spaces with small storefronts, good intrinsics and market-level rents. The cap rates for these properties are just as good as they were at the peak." "We're seeing a lot more creative deals in the current market," says Schuster of RKF. "Deals are including a lot more partner- ship and collaboration between landlords and tenants with creative lease terms. It's a lot more complex than it was in years past, which is exciting for us as brokers. The trend really is that retailers are looking at their capital and they're looking at where they should be investing." HOT MARKETS IN NYC SoHo, NoMad and Nolita are consis- tently named as neighborhoods to watch. "The only consistent destination shopping area right now in New York City is SoHo," says Rosenthal of Eastern Consolidated. "We know that locals and visitors want to shop SoHo. While there are other won- derful areas that have strong shopping corridors and a strong shopping base, right now it's not clear that any of those other neighborhoods are a consistent des- tination. Right now, all of my clients are being very cautious and thoughtful about where they're looking to expand." Tangram is currently under development by F&T; Group and SCG America in the Flushing neighborhood of Queens. The property is currently being leased by The Shopping Center Group, and will include a 225,000-square-foot retail podium with a movie theater, culinary food hall, beer garden, shops and entertainment.