POP UP THE ANTE
Retailers turn to shortterm shops for the holiday season to test waters for longer leases
IT’S official: Pop-up shops are here to stay. An uptick in storefront vacancies, falling rents and retailers’ reluctance to commit to traditional leases have combined to make these temporary stores appealing to both owners and brands.
Whether test-driving a neighborhood or invigorating a tired label, pop-up shops provide an influx of income to both parties while they weigh the benefits of a longer lease. “They’re energizing the market,” declares Faith Hope Consolo, chairman of retail for Douglas Elliman.
In the past, only a few owners allowed short leases for seasonal Halloween and Christmas shops. But now, competition from online shopping coupled with a playful public seeking unique experiences have softened up reluctant building owners.
Today’s pop-ups are also aligning with popular culture to drive sales, brand awareness and overall excitement. This year, Gwyneth Paltrow’s beauty, fashion and home site Goop; Sarah Jessica Parker’s shoe line and Drew Barrymore’s clothing and jewelry have popped into their own spots, while established brands like Louis Vuitton and Yankee Candle have camped out in tourist-trafficked areas.
“There is inventory, and now landlords who wouldn’t normally lease to pop-ups want to,” says Karen Bellantoni, vice chairman of RKF. “There is the likelihood that someone does so well there that they will stay. It’s not about the income but about getting the right tenant.”
That’s why owners are now cutting deals for terms from a week to a few months to as long as two years — in the case of Gucci at 375 W. Broadway in Soho. Fingers are crossed that the retailer’s trial run will justify going from “pop to perm.”
According to PopUp Republic, which matches events and retailers with open spots, pop-ups bring in $50 billion in total annual sales nationwide.
Public Web sites such as AppearHere also make it simple for brand managers to quickly find an appealing storefront for very short time periods without the huge cash outlay or months of negotiations typical of a long lease.
Most of the initial short-term deals are completed under a license agreement — a less complex arrangement than a fully negotiated lease, according to Jeffrey Roseman, executive vice president of Newmark Knight Frank Retail.
Adds David Koeppel, a principal with Koeppel Rosen who manages real estate portfolios, “A short-term license permits you to occupy the space without creating a tenancy,” says Koeppel. A license, for instance, makes it easier to evict.
The pop-up phenomenon provides income to all involved, but it’s also a tangible sign that the leasing market is changing, explains Brian Klimas, economist for the Real Estate Board of New York.
Before going perm, the retailers want to understand the landscape. Says Consolo, “They want to be sure they are in the right location, while at the same time, engaging their shoppers creates an experience that connects them with the brand.”
Consolo represented the owners in a six-month deal with a beloved Aussie leather goods seller, The Daily Edited, at 385 Bleecker St. in the West Village, where Isaacs and Company represented the tenant.
In the Madison Square Park area of NoMad, Grant Greenspan of the Kaufman Organization has allowed a few pop-up stores in the bases of his company’s office buildings. “I’ve done a pop-up license for a week or two weeks, and it drove traffic to the building,” he recalls. “I got showing activity out of that, which could have even led to some office leases.”
Adds Susan Kurland, co-head of Savills Studley’s global retail services group, “I guarantee a number of the pop-ups will convert to long-term deals.”
For instance, RKF’s CEO Robert Futterman reports that the high-end online consignment shop, The RealReal raked in $2 million in a twoweek stint last year. The e-tailer has since signed a lease at 80 Wooster St. in Soho. Additionally, Northern Grade, which sells US-made goods, settled into the Seaport at 203 Front St. for the long term after testing pop-ups across the country.
In Soho, Drew Barrymore chose 14 Crosby St. for Dear Drew, which opened in November for a six-month run. “If Drew Barrymore does well, why wouldn’t she stay?” asks Greg Kraut, a partner with K Property Group. “There are lines down the block,” he adds.
Soho is also the scene of British designer Sophia Webster’s beautifully embellished shoes. Downtown, Red Wing Heritage is hawking its made-in-America wares.
And while pop-ups have long been tied to the holidays, it’s no longer enough to just display gifts and ornaments. Retailers like Yankee Candle are creating exclusive designs available only at that location as well as Instagram-friendly tableaus.
Roseman represents a large space at 140 W. 42nd St. by Times Square, which has several floors and a marquee-like LED sign. Here, the cult backpack and accessories brand, Sprayground, created a store for one week this November. Roseman hopes another brand will recognize its potential and lease all 17,000 square feet. “It’s always very exciting when you can get that kind of visibility for your space,” Roseman says. “They were all over social media.”
Some owners are creating energy with a program to ensure a series of temp tenants. The W hotel in Times Square has various artisans and designers. Brookfield Place, for instance, rotates kiosks and smaller retailers every few months. “We require a nice kiosk and we want a vibrant experience,” says Michael Goldban, senior vice president of Brookfield Property Partners.
More recently, Brookfield has even tested out some stores for just one week. “We are getting some cool emerging brands,” Goldban says. “Fewer tchotchkes but now luxury designers, and more gifts and fashion.” Currently, Louis Vuitton has a storefront open through March 2018. Even Google has a space — in Flatiron at 110 Fifth Ave. — leased through New Year’s Eve.
The benefits of pop-ups for building owners include creating cash flow, bringing attention to the space and allowing a retailer to try out a new concept, space or neighborhood, says Jedd Nero, director of retail for Avison Young. “The best scenario for a landlord is if the space works for the tenant and they enter into a long-term lease,” he adds. But Nero cautions that pop-ups aren’t a cure-all for all store owners. “For certain owners, it’s just a Band-Aid, as they have ongoing financial obligations,” he says. “Eventually, [the lack of a long-term tenant] will catch up with them.”
In the same vein, most brokers are still leery of recommending anything other than A-list retailers. “Only under very rare circumstances would I recommend a pop-up for my clients,” explains Kim Mogull, CEO of Mogull Realty. “There is too much that can go wrong.”
Along with ordinary slip and falls, other accidents can occur, creating a legal land mine for everyone. Years ago, poorly rolled-out sneaker releases by several brands caused riots and injuries. And employees rushing to open a short-term shop may not securely place furniture, thus creating hazards. But for now, shoppers are embracing pop-ups, in part so they can touch and feel products that they’ve only seen on their screens.