National retailers here to stay in New York City

Real Estate Weekly, Dec 4, 2002 by Richard Hodos

Despite a downturn in the economy and a perception that interest by national retailers in expanding is less significant than in the past, the conversations we've had with clients prove the New York City market is as compelling as ever. While it's true that the heady days of the late 90's, when retailers were gobbling up seemingly any and all available space, are gone, national retailers in all sectors are here to stay. They're just refining their strategies to make sure they expand sensibly within the context of a slower, more uncertain economy.

We had a number of clients lose stores in the World Trade Center. But instead of being scared away from Manhattan in general and Lower Manhattan specifically, it's only served to increase their resolve to rebuild. Borders Books & Music is the perfect example. Their downtown flagship store was lost Sept. 11. Not only was this a tremendous loss for them as a business, it was a loss to the residents of Downtown. The World Trade Center Borders was more than just a bookstore -- it was a gathering place for residents, students and workers in the neighborhood. As Madelyn Wills, chairwoman of Community Board 1 was recently quoted as saying, "there were a lot more emotional connections than just a place to shop."

When we announced that Borders was coming back Downtown, to a 33,000-SF space at 100 Broadway, it was a psychological boon to those for whom the World Trade Center Borders was an important part of their day-to-day lives. At the same time, it was a signal to other national retailers that Lower Manhattan is a dynamic retail destination and one of the best locations in New York City.

Why is the area such a great location? Lower Manhattan serves over 7.5 million people annually. The residents of Lower Manhattan are among the wealthiest in New York City while those who commute in and out of the area are among the wealthiest in the tri-state region. At the same time, retail rents in the area, which are in the $100-$150 per SF range for streetfront locations, are more affordable than they have been in the recent past. All this adds up to a great opportunity for retailers.

At the same time, national retailers are beginning to revise their thinking in terms of space. Just a couple of years ago, everyone thought bigger was better. Now, they're finding that isn't necessarily the case. Sephora, which we work with in the metro New York area, has found, that they make as much money in a 5,000-SF store as they do in a 10,000-SF store. It's not downsizing for the sake of doing it, but expanding sensibly in a time when grandiose retailing strategies are best tempered with a dose of caution. Lower Manhattan has plenty of spaces to accommodate this type of strategy.

The Broadway area Downtown is a natural corridor in terms of public transportation and pedestrian pathways. Likewise, the World Financial Center is a destination in and of itself and many retailers are looking at that as a potential opportunity. We see the return of Borders serving as a catalyst for other retailers and expect to have many exciting announcements in the near future.