Recovering economy spurs consumer spending

Real Estate Weekly, March 2, 1994 by Edward A. Friedman

The year ended on an upbeat note as retailers celebrated Christmas with excellent sales as a result of a general feeling among consumers that the recession was ending. So says Edward A. Friedman, president of Newmark Retail Services, whose retail report tracks rental rates for retail space throughout Manhattan.

According to Friedman, beginning in November 1993 and continuing through the critical Christmas season, retail sales were significantly higher than during the same period in 1992.

"Consumer confidence is high because of low inflation and interest rates," said Friedman. "As a result, there has been a big boost in sales for furniture, appliances, and consumer electronics, and department stores such as Macy's and Bloomingdales have advanced well ahead of last year's sales figures."

According to Friedman, Wall Street had a booming year, even though only. 2,000 new employees were hired in the past 12 months. He adds that the retail market continues to be affected by layoffs of over 100,000 workers during the past few years. Layoffs will continue in 1994, as downsizings are planned by such major corporations as General Electric, Phillip Morris, Xerox, Westinghouse, Gillette, IBM and Sears.

Numerous retailers were also affected by the economic downturn in 1993. Retailers such as Merry Go Round filed bankruptcy; Kiddie City went out of business; and Conrans announced that its stores will close by April. The Woolworth Company is closing numerous stores, but replacing some with Drug Stores.

On the positive side, numerous retailers are expanding throughout Manhattan, according to Friedman. Tandy expects to hire people and retail activity is heating up in the 14th Street corridor, with Bradlees slated to open a store in the former Mays Department Store site. In addition, Toys R Us is expanding into Kiddie City's former site on Union Square, as well as expanding its existing store on Broadway and 33rd Street.

On the high end of the market, Barney's and Polo Sport opened on Madison Avenue, while numerous retailers leased new locations, including Cosmetics Plus, Strawberry, (which took over Plymouth Shot), Lechters Housewares, Staples, Athletes Foot, Au Bon Pain, Hermans Sporting Goods and Duane Reade Drugs.

In 1993, the coffee bar craze finally swept Manhattan as retailers such as Timothy's, New World Coffee and Pasqua opened stores and expanded throughout the city.

Other newcomers to the Manhattan retail scene are Filenes Basement; Gymboree, the children's clothing retailer; Bed, Bath and Beyond; Today's Man; Comtempo Casual; Sports Authority; and Warner Bros.

According to Friedman, the expansion of established retailers and the influx of new retailers to New York City can be attributed to rental rates that fell as much as 20 percent in some areas from a few years ago and the availability of prime locations. He says that retail rents are, in most cases, up approximately 20 percent from last year and supply is starting to dwindle,

though the downtown area remains depressed.

"There is a sense of guarded optimism among many retailers currently expanding throughout New York City," said Friedman. "We are still seeing new retailers coming into Manhattan and the boroughs, and by the latter part of 1994 we will see an overall expansion as many retailers who were able to survive the recession continue to thrive."