Despite worries about tourism numbers and some corridors experiencing rent weaknesses, experts see nothing but good things for the future of New York City’s retail scene.
A new visa program that would allow Chinese visitors to stay in the US longer and a settling of price disconnects were among the positives discussed at a the New York University Schack Institute Capital Markets Conference at the Pierre Hotel in Manhattan.
Retail executives discussed the role tourism plays in the market, where retail is growing in the city, and game-changers for the industry.
“The tourists are coming but not spending as much money because of the exchange of the dollar,” said Laura Pomerantz, head of strategic accounts at Cushman & Wakefield.
She recalled a client telling her about a customer coming into her store, picking out items, but then ultimately changing her mind at the register saying “I’ll buy it better at home.”
Panelists noted that tourism tumbled at the beginning of the year when fewer Russians visited New York after a steep drop in oil prices, followed by Brazilian and Chinese tourists, after economic turmoil in the two countries.
“I think there are headwinds, but in spite of that, I think there’s strength in the market,” said Haim Chera, principal of Crown Acquisitions.
“I think Times Square continues to surprise us all, when prices broke $1,000 a foot, we said wow, it’s Times Square, there were peep shows here 20 years ago, and now retailers are paying $1,000 a foot, and now people are comfortable saying $2,000 per foot in Times Square.”
Chera touched on Soho’s struggles, saying that the neighborhood is “starting to settle” and that the shopping corridor is seeing weaknesses after getting ahead of themselves, however, he sees strength in side streets, like Spring Street, for some retailers.
“I think there’s a disconnect between tenants and landlords,” said Pomerantz of Soho’s retail weaknesses along Broadway, citing a 13.8 percent rise in Soho rents in the third quarter this year, and a 22.2 percent availability rate.
However, Chera shrugged off the weaknesses, saying the numbers are “temporary blips.”
“I think the Chinese luxury spend is the biggest subject of discussion in the luxury retail world,” said Chera. “North America has just begun to feel the effect of the Chinese tourist spending.”
Last year, the U.S. and China agreed to reciprocally increase the length and validity of short-term business and tourist visas for each other’s citizens. “As more are issued, I think that will be a landscape changer in a positive way,” said Chera.
The Real Estate Board of New York (REBNY) released its Manhattan Fall 2015 Retail Report last week, and the study found that the market finally showed some softening, with ground-floor asking rents decreasing in seven of the 17 major retail corridors.
REBNY attributed the softening to the increased amount of supply available in the corridor, and landlords being eager to keep their spaces leased.