X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

NEW YORK CITY-At a retail real estate roundtable, hosted by Berns Communications Group, three retail experts gathered and recounted some of the challenges and possibilities that await retail’s future. Michael Burden, principal of Excess Space Retail services, Laura Pomerantz, principal of PBS Real Estate and Jim Schaye, president and CEO of Hudson Capital Partners brought their knowledge to the table on Park Avenue examining the future of malls, the European invasion and store closures.

Burden noted that over the last six, eight and 10 months, a trend began developed as more and more retailers started looking for concessions from landlords. Now, everyone asks for them. This will play out over the next quarter or so, he thinks, and then there will be more store closings coming our way in the first and second quarters of 2010. However, Schaye points out the other interesting turns during the last two quarters that are making an impact: private equity jumping back in and strategic buys, such as the Syms purchase of Filene’s Basement.

“Is this the light at the end of the tunnel or the freight train coming at us?” Schaye said, adding that really only time will tell if any of these purchases or investments were a good idea.

The notion of closing down stores has lost some of its doomsday cache of the last few months, Pomerantz pointed out, offering that Wall Street sees some store closings as a positive. The “healthiest thing you can do” is constantly reviewing stores performances.

Burden agreed, saying “some of the bigger retail stores opened stores and they just don’t want to close them,” but smart retailers should always be looking at the bottom 10% to 15% of their performing properties and look for ways to make changes. Schaye added that getting out of some markets gives retailers a more beneficial economy of scale, tacking on, “Store closings are not a terrible thing.”

Regarding the space issues that these closings present, Burden lays down some sobering words, “The retail landscape is changed forever.” With public shopping attitudes changing there is going to have to be a re-evaluation of how and where people are shopping. And as important, problems will be compounded in 2010, Burden explained, when a lot of landlords have notes due and creditors will not be willing to lend.

Burden pressed further into the geography of future retail, predicting that many types of malls will become obsolete and that landlords will need to be “much more creative with attracting tenants.” There will have to be movement towards turnkey concepts or perhaps rent incentives, he called on as examples.

And Pomerantz pointed to areas in New York which held up, because of their traffic and concept stores, notably Fifth Avenue between 48th and 59th streets and Soho on Broadway. Madison Avenue, however, was hit a bit harder because it out-priced itself from innovative renters, leaving high-end luxury brands and jewelry stores as the only stores that could afford the rent, ergo the only ones to compete in a limited space, driving down traffic, as shoppers looked elsewhere for a more diversified and affordable alternative.

The discussion was not all doom and gloom, however, as the trio turned its eyes on Europe. American retailers have had a good amount of success pushing into Europe, as Europeans are aware of the brands and gravitate toward them. The converse was true as well, with European brands seeing America as a growth market. H&M, Zara and the like are slowly becoming “boutique killers,” said Pomerantz, as their vertical models were crushing gross margins for competing companies with a broader base model.

Pomerantz points to some fundamental differences in Europe which will allow the American companies to gain a foothold. “Europe is under-malled,” she explained, adding there will be over 60 new malls planned over the next year, along with expansions of street retail makes Europe a great “growth vehicle” for well-positioned American retailers.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.