Newmark New Spectrum's Fox: retail is where the action is

Real Estate Weekly, Oct 23, 2002 by Benjamin Fox

Despite economic and consumer uncertainty, what is clear is that shoppers are still out in the marketplace in full force. They may have to be attracted with initial discount offers to get into stores, but this type of promotion had been in effect pre-Sept. 11 and pre-recession.

Demand is generated by local players such as Scoop, Searle and Kate's Paperie, and the entry of national chains such as Chico's, Arden B, and Forever 21. Others such as H&M and Marshall's are forging ahead in neighborhoods like Harlem that were previously skirted by large national and international retailers.

Perhaps none have surpassed the expansion taking place in the consumer-banking sector. Washington Mutual, Commerce Bank and North Fork are all leasing multiple locations in both commercial and residential neighborhoods. And luckily for landlords, these financial institutions are paying top dollar where other tenants might be wary about what there sales per square foot would be. Why are they expanding so broadly? Like other expansion-minded tenants, they see the possibilities for growth in the areas of service where their competitors may be lacking.

Is it novel to be open seven days a week? Only for banks: Every other type of retail has yielded to the expectations people have to be able to walk in seven days a week, and with extended hours. If Chase and Citibank are not consumer friendly, you can walk into one of these newcomers' branches and apply for a residential mortgage any day of the week. With a combination of low interest rates and a hot residential market, there is plenty of demand. Forward-thinking banks have taken this approach to customer service, in an industry where improved customer service previously meant the addition of more ATM's.

The expansion of retailers closely keyed in to what drives consumers is also evident in the home furnishings and home accessories category. The local "Gracious Home" continues to expand on the retail front with the addition of a new store focusing on lighting, incidentally on the same block where a new branch of Washington Mutual will open. This retailer is in tune with the affluent Upper East Side residential customer who is willing to pay more for what they want. At the same time, big box chains catering to this same category of home goods, but at more affordable levels, such as Bed, Bath, and Beyond, are capitalizing on strong sales of residential real estate in New York. All of these new homeowners need items for their new homes, and they are not hesitant to spend on such goods, whereas they might be for apparel purchases. Additionally, Best Buy and P.C. Richards are selling appliances and electronics in large-scale format stores.

Those who work or live in New York will always need to eat, whether in fast-food venues or expensive sit-down restaurants, which is precisely why Red Lobster and Olive Garden are making inroads here. At the same time, local restaurateurs such as Steve Hanson are opening hip new restaurants such as Dos Caminos on Park Avenue South or nightspots such as Capitale, located in a former bank building on the Lower East Side. Don't lose sight of the fact that there are still not enough 1,200-SF spaces for Stabucks to open in. This is just another example of an international company, seizing the opportunity at a moment in time when others are reluctant to make a move.