Retailers sweet on Big Apple - New York, New York offers economic opportunities for home furnishing stores - Special Supplement: Home Market Trends - Cover Story

Discount Store News, April 6, 1992 by Patricia Lobosco

Like Mark Twain's death, the reports of retailing's demise in new York's current economic slump may be greatly exaggerated. Popping up all over this densely populated and recession-wracked inner city are home market merchants who've opted to expand in the past year. Are these ventures of the foolhardly or the prophetic?

Steven Greenberg, president of the Greenberg Group Inc., New York, thinks these retailers "are going to come out being real heroes two and three years from now" because they've been able to spot good "bottom fishing" when they see it. "There are some great deals out there," said Greenberg, whose view of the current business crisis is shaped by 15 years in the athletic footwear business and five years as a real estate advisor to leading national retailers.

"When a retailer signs a lease for 10, 15 or 20 years," Greenberg explained, "that lease can very well be an asset to the company if it was done at a below market rent. So if today the market is $30 a foot and they're able to go out and make a $20 deal, and they can own that lease for a long period of time, when we get out of this recessionary period . . . and the rents start climbing from $30 to $40 to $50 per foot, that retailer who made that $20 deal is going to look like a genius. And he will have an operating expense that is considerably less than his competition and therefore he'll probably have more profits at the botton line."

Certainly this was true for Curtains and Home, the Long Island-based specialty home fashions chain which opened its first Manhattan store last spring. Company president Arthur Berkell was unequivocal about the reason behind the chain's expansion: "There are great real estate deals out there."

While the soft real estate market was not cited as a major factor in the creation of a Williams-Sonoma Outlets Center on Manhattan's Lower West Side, lower and prices across the country have helped the upscale kitchen retailer expand. "We have been able to take advantage recently of good leasing opportunities," said Penni Wisner, director of public relations for the homeowners retailer. "I think that's why we've continued to open stores. It's been a buyer's market," she noted. "We look for great location in great malls at great prices and there have been places available to us that suited us."

Nevertheless, even the soft real estate market is no guarantee of success. After all, there's a reason why property prices are down. "Expansion always contains risks. The safest thing you can do is to do nothing," said Greenberg. However, he warned, "If you do nothing, you'll get gobbled up by the competition. So you try to be prudent and thoughtful about your expansion."

Extraordinary attention to location, customers, service and product are the hallmarks of those retailers who have dared to cash in on the opportunity afforded by the current real estate market, but want to minimize their risk and ensure their survival.

Certainly Williams-Sonoma was well aware of the potential risks when it expanded one of its specialty store concepts - Pottery Barn - in an outlet center in Manhattan. Some executives and concerns about the location. Others feared the new Pottery Barn would hurt business at the uptown Williams-Sonoma store. Nevertheless, the company went ahead. "Overstock was actually dragging the company down the longer we warehoused it," said Wisner. The Pottery Barn outlet helped ease the overload.

The real estate consultant, Greenberg, also pointed out the special considerations of retailers looking to expand in center city locations. "You want . . . the most visibility. A corner location if it's downtown. A store that has more frontage is always better than less because that affords you more signage. We are also very concerned . . . that the tenants in that center or on that street are cohesive for that client."

Transportation to the store is also a major consideration. Said Greenberg, "We kind of judge real estate from a vehicular standpoint by a pre-archaic method: Would my grandmother be able to get there?"

In central business districts, however, "We look at things like access to public transportation. We'd want to locate near the subway station or near the bus station so it's convenient to get there. We do a lot of pedestrian traffic counts."

All in all, customer density in downtown areas is often a substantial lure to retailers. Williams-Sonoma risked expansion partly because of its experience of Manhattan as a "great market" with a plentiful supply of potential customers. "We have always enjoyed tremendous customer loyalty on the East Coast and we have a tremendous number of customers there," said Wisner.

Berkell of Curtains and Home concurred: In Manhattan, "per square anything, you've got more customers than almost any where else on the planet."

The mere presence of potential customers, however, is still not enough to do the trick. You also have to pay attention to those customers. "There's some very talented, aggressive retailers who have stayed close to their customers, listened to what they wanted and responded to those needs," said Greenberg.