Man­hat­tan Pop-Up Shops Might Be Here to Stay

The Jewish Voice - - NEW YORK - By Hellen Zaboulani

These days, with the soft­en­ing real es­tate in­dus­try in Man­hat­tan, sta­ble long-term re­tail ten­ants are a scarcity. To com­pen­sate, the real es­tate in­dus­try is adapt­ing to short-term ten­an­cies, named li­cens­ing deals. Li­cens­ing deals al­low ten­ants to use a space rather than own it for a spec­i­fied time pe­riod. The method is be­ing used to rent to pop-up shops in the city. A pop-up ten­ancy can last from a day up to a year. Both land­lord and ten­ant can ben­e­fit be­cause it avoids lengthy le­gal pro­cesses, and by­passes the usual 80- to 100-page lease for a curt ver­sion.

It ap­peals to ten­ants be­cause it al­lows them to test the mar­ket be­fore ty­ing them­selves down and com­mit­ting for the long run. The owner makes money on the prop­erty while it re­mains on the mar­ket for a long-term lease. The ten­ant gets vis­i­bil­ity in the pres­ti­gious New York mar­ket with very limited risk. The land­lord ben­e­fits in avert­ing an empty store front, and as a bonus many pop-ups come with celebrity back-up, such as Gwyneth Pal­trow and Kanye West, which help en­dorse the prop­er­ties.

As per The Real Deal, pop­ups were tra­di­tion­ally seen as short term im­pro­vis­ing that land­lords and bro­kers used while waiting for per­ma­nent ten­ants. But some ex­perts say these trans­ac­tions will be­come in­creas­ingly sought af­ter, as build­ing own­ers strug­gle to min­i­mize va­can­cies in the on­go­ing bat­tle be­tween brick-and­mor­tar stores and e-com­merce. Cur­rently, less than 15 per­cent of all re­tail sales in the U.S. are made on­line. By 2025, how­ever, it is es­ti­mated that one out of ev­ery four pur­chases will be made on­line, as per a Novem­ber 2016 re­port from FTI Con­sult­ing. These odds cre­ate a daunt­ing re­al­ity in which re­tail stores are in­creas­ingly guarded when it comes to sign­ing long term leases.

“Things change so dras­ti­cally these days, it’s harder for re­tail­ers to con­sider a long-term deal,” says Kelly Gedin­sky, Winick Re­alty Group bro­ker. “Un­like five years ago, land­lords are more open to pop-ups be­cause so many [po­ten­tial ten­ants] are com­ing to them and their bro­kers say­ing, ‘Look, we want to test this mar­ket for a year. If it works, we’d be happy to look

“Things change so dras­ti­cally these days, it’s harder for re­tail­ers to con­sider a long-term deal,” says Kelly Gedin­sky, Winick Re­alty Group bro­ker

into a longer-term deal.’”

Man­hat­tan Bor­ough Pres­i­dent Gale Brewer’s of­fice counted 200 va­cant store fronts along Broad­way this June. She places the blame on high rents, and e-com­merce aug­mented by Man­hat­tan’s pricey com­mer­cial rent tax. Be­tween 2010 and 2014, av­er­age ask­ing rents in 16 Man­hat­tan strips, as tracked by CBRE, jumped 89.1 per­cent. It is “an un­sus­tain­able sit­u­a­tion for some ten­ants as rents sur­passed what their sales growth could support,” says the bro­ker­age firm. Man­hat­tan va­can­cies have been on the rise since, from a low of 2.5 per­cent in 2012, to 3.7 per­cent in 2016, and now 4.2 per­cent in the first quar­ter of 2017, ac­cord­ing to Okada & Com­pany.

A San Fran­cisco-based web­site en­ti­tled Store­front, lists va­cant store­fronts al­low­ing po­ten­tial pop-ups to browse through avail­able spots on a map, by price and square footage, sim­i­lar to Airbnb or StreetEasy. The site charges a 20 per­cent fee, and a com­pany rep walks a renter through the process. “We don’t see our­selves as a com­peti­tor to the tra­di­tional re­tail mar­ket … We just see that space is space,” said Joy Fan, Store­front’s na­tional direc­tor. “Va­can­cies are un­for­tu­nate, but the shift needs to hap­pen, so we’re re­ally ar­chi­tect­ing the next layer of re­tail for the fu­ture.”

A pop-up ten­ancy can last from a day up to a year. Both land­lord and ten­ant can ben­e­fit be­cause it avoids lengthy le­gal pro­cesses, and by­passes the usual 80- to 100-page lease for a curt ver­sion

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