New York City Retail Opportunity Never Better, Nor as Challenging
2018 is a compelling time to be in retail real estate, especially in New York. Sure, rents are probably still too high, but the vacancy rate keeps pressure on landlords and developers. There is no doubt Amazon will continue to disrupt and dominate, but reports of retail’s demise have been greatly exaggerated.
The lower rents and vacancies are creating opportunity for retailers who can adapt to the factors driving consumers’ shopping habits. Perhaps more importantly, many of the city’s most desirable retail corridors such as Fifth Avenue and SoHo were historically difficult to come by, regardless of a tenant’s ability to pay. Now, opportunity beckons.
The latest census data indicates New York City is growing and that the trend will continue as people seek urban environments to live, work and play. Futurists predict urban population growth to continue throughout the century. But it isn’t just residents and workers flocking to the Big Apple. More than 60 million tourists visited the city in 2017 and even more are projected to visit in 2018.
Recent technological advancements have changed many aspects of human behavior, from the way we interact with one another to how we get around and how we purchase products.
It’s imperative that retailers understand this and understand that the days of attracting customers through a pretty window display and simple marketing campaign are gone. People are spending more and more of their time consumed by mobile devices. The brands that best understand how to reach consumers across digital and everyday platforms will be the big winners.
What follows are a few trends to watch for the rest of 2018:
People are thirsty for experiences that they can’t get on their phone or computer. This is the main reason food and fitness continue to outperform.
Nutella continues to build its brand with select strategic flagship locations. After signing its first U.S. café in Chicago, Nutella came to New York wanting to make an impact on the city. Given that New York is one of the world’s top tourist attractions, the New York City Nutella Café will become a real-world celebration of its unique product line.
Ferrero SpA, Nutella’s parent company, chose Union Square for the first New York City Nutella Café. The neighborhood has tremendous energy and foot traffic and is a central public transportation hub.
Similarly, the 20,000-square-foot Starbucks Roastery, opening this fall in the Meatpacking District, is another great example of how experiential retail transforms consumer brand perception. The Roastery will create a Willie Wonka-type experience with an actual working roastery, a bar and restaurant, in addition to offering a premium line of coffee.
Like Nutella and Starbucks, there are several boutique and national fitness concepts across the city reinventing themselves.
Peloton’s signing of 35,000 square feet at Hudson Yards is a great example of a fitness brand that truly understands its customers, using technology to reinvent the indoor cycling market.
Successful health-focused food brands from other markets continue to flourish in New York. Two recent examples, Sugarfish/Kazanori and Tender Greens, both entered the city in the past 12 months. Anyone who has ever waited in fast casual concept Sweetgreen’s lunch or dinner line knows that this health trend is going strong.
These brands demonstrate that fresh concepts can blossom and flourish despite online disruption.
More e-Commerce Stores
Successful e-commerce businesses like Amazon, Warby Parker and Everlane have been moving aggressively to open brick-and-mortar locations in major cities like New York. Equipped with a treasure trove of customer data, they are using information to select the ideal location.
Everything about the in-store experience is optimized, from the store’s footprint to its inventory. At the same time, these brick-and-mortar locations increase online sales while expanding the customer base.
Suitsupply’s newest location at the William Vale Hotel in Williamsburg, Brooklyn, is another example of leveraging e-commerce orders to determine location. The data indicates Williamsburg and the William Vale location have quickly become a home run.
More Opportunity in 2019
Looking ahead to 2019 and beyond, it’s going to be very exciting to see how drone delivery, autonomous cars, e-scooters, and improvements in urban transportation continue to transform New York’s retail landscape. One just has to walk amongst the many buildings under construction at Hudson Yards to see how the city is changing.
A new subway station opened two years ago, even though not a single new storefront, office or residential home was ready to be occupied. By 2020, there will be more people shopping, living and working in Hudson Yards than in most American cities. The subway stop was key to developers’ committing to the area. Look for more cooperation between city government and business, not less. That means more opportunity.
New York City will continue to be the most exciting and compelling retail landscape in the world. While the city is not for the faint of heart, the opportunities it creates simply cannot be ignored.