It feels as though the only thing retail professionals are talking about is the Amazon Effect and consequently the Retail Apocalypse. The former being e-commerce’s impact on brick-and-mortar, named for the online bookstore turned e-commerce juggernaut that is increasingly touching every part of our lives. The latter refers to the wide-spread store closures hitting almost every inch of the retail industry.
These trends cannot be denied; WWD itself cited over 9,400 store closings in 2017, “up 53 percent from the number of doors that went dark amidst the Great Recession in 2008.” However, where most see a Retail Apocalypse, others see a Retail Evolution. One of these leaders is RXR Realty, one of New York’s largest owners, operators, and developers with over 1.14 million square feet of retail portfolio across New York metro area.
RXR is committed to the long-term viability of its assets and the New York Community, which means retail tenancy is more than receiving rent. The firm’s retail portfolio’s mission is to add value to the asset’s occupants, whether it be office tenants or residents, and the overall neighborhood. Alan Schmerzler, Vice Chairman of Cushman & Wakefield’s Retail Services, explained this, “What is so interesting about RXR’s approach as a landlord is the diversity of projects that they are involved in. They range from Class A trophy office buildings with retail at the base, to urban and suburban renewal such as The Hall in Brooklyn and their project adjacent to the Nassau Coliseum. The common underlying theme to everything RXR does however is ‘place-making’.”
This translates into a strategy that is beyond a transactional store; it’s is about collaborating with potential retailers on creative augmentations to their service lines. “Every project is unique and ‘speaks’ to the neighborhood in an important way. I think that kind of strategy appeals to retailers and to the retail brokerage community, because it allows for creative thinking and problem-solving, and it certainly encourages retail brokers to bring their tenants to RXR’s properties,” continued Schmerzler.
The partnership approach RXR takes as a landlord generates ample potential for retailers who are looking to experiment. The firm welcoming new concepts and providing a playground for such experimentation creates an unexpected but appreciative response from brands old and new who need to innovate to stay afloat.
Schmerzler concluded, “the retail market is in an interesting place – overall, rents have trended down in response to supply and demand, and tenants are definitely coming off the sidelines and testing the waters. The most active categories continue to be health-and-wellness, cosmetics, fitness and F&B; while in Times Square there are a number of entertainment and ‘attraction’ tenants searching for large blocks of space.”
As one of the largest owners in the New York region, RXR also benefits from fostering these innovations as one successful concept could be replicated elsewhere in its portfolio spanning the metropolitan region with current availabilities ranging from 1,700 – 90,000 square feet.
RXR strategically invests in projects that can support its robust retail program as well as assertively engages with its current retail tenants to inspire creative solutions for space, innovations in their merchandising plan, and new ways of looking at energized street appeal – especially in buildings with landmark restrictions or other governing circumstances. For example, the firm is currently redeveloping 620 Avenue of the Americas, located on Ladies’ Mile.
The project will restore approximately 400 feet of glass, including about 200 feet of newly installed storefront. RXR will also be removing the existing awnings in order to fully expose the breathtaking 19ft high glass and unique vaulted ceilings. The landlord is also in frequent communication with Landmarks in order to explore creative signage and display solutions for new and existing tenants while compiling with minimum depth requirements.
“The new storefronts will allow activation along the asset’s side streets,” noted David LaPierre, Vice Chairman with the Global Retail Services Team at CBRE. “Divisions along 18th and 19th street will facilitate a best-in-class curated tenant mix unseen in the building in decades.”
RXR Realty, beyond being an owner and operator, is also a developer with an extensive design and construction team. Once leases are signed, it is up to this service line of the company to collaborate with the tenant to create an immersive environment. RXR thinks about the layout and décor of each retail space in order to add the aesthetic touch to its stores where even an everyday need can not only be met, but memorable.
This is currently underway at the Starrett-Lehigh Building in West Chelsea, where RXR is in the process of finalizing terms of an exciting restaurant concept and is healthily underway of the design and curation of a collection of food and beverage experiences, both on the ground floor. The building’s 5,000+ office tenants will not only be served from coffee to cocktails and dinner, but a daily activity as simple as getting lunch will be engaging and meaningful. Also on the ground floor is the Starrett-Lehigh Expo, a brand new multimedia event space, which has already been rented by top brands in fashion, technology, and fitness.
While most landlords are adamant about long-term leases, RXR acknowledges that the market is still figuring out various areas of pricing for new concepts hoping to make an impact in New York. Additionally, retailers are reluctant to enter new markets without proven case studies. RXR is not shy to test and experiment with popups to build these case studies.
By activating vacant retail through shorter leases and popups, RXR in turn demonstrates successful usage of the space for long-term users. Locations can often be taken for granted or overlooked; the fostering of pop-ups give true data to foot traffic and sales. Recent popups have culled art, coffee, fitness, multimedia experiences, and more to not only test viability of a building’s ground floor, but also establish portfolio wide programming as part of the firm’s amenitization and service synergies for its office tenants and residents.
Ensuring success for this program, RXR is able to market these activations throughout its portfolio. Michael O’Neill, Executive Managing Director of Retail Services at Cushman & Wakefield praised the capability, “Retailers will be able to benefit from unique cross-promotion and partnership opportunities within RXR’s portfolio on this platform. This dynamic marketing opportunity and activations within the RXR portfolio will be accretive to building brand awareness, driving sales, and signing of long-term lease.”
RXR’s strategy is fueled by “the parade of clicks to bricks,” where “internet-born brands recognize that [physical] stores boost sales,” as reported in the New York Post. The dominance of e-commerce has nurtured small brands into household names which are still looking to expand.
The New York Post also cited Jared Epstein of Aurora Capital, a firm that owns and develops retail buildings. “There’s finally a queue of these millennial brands, which have been created through the prominence of social media, that are starting to do brick and mortar,” explained Epstein.
“An additional growing trend in retail is the shift in how we engage in space,” shared Whitney Arcaro, Executive Vice President at RXR Realty. Arcaro who heads marketing and retail leasing at the firm emphasized how “retailers are no longer restricted to the ground floor of an asset, but now able to weave through every inch of a property,” and how this influences RXR’s retail strategy.
When asked about today’s retail market, Trever Gallina of Isaacs and Company commented, “revolutionized by social media, customers are able to communicate interests directly to brands giving retailers first-hand data to make business decisions.” While this practice is useful, it is reactive.
The next frontier for retail will be customer data collection. This innovation will allow retailers to take bolder steps in leading customers to new experiences and developing new behaviors proactively, not reactively.
Today, retailers and landlords are picking and choosing which trends to adopt and which to write off. However, it will be the retailer or landlord that merges and refines these trends into a and cohesive and proactive strategy, will be the one to define the retail market moving forward.