The Bronx ended the year at the top of the heap when it comes to real estate investment and development.
The borough experienced a 132 percent bump in dollar volume of multifamily investment sales, with $167,290,000 in deals in October according to a report from Ariel Property Advisors.
And the Center for an Urban Future reported that the Bronx had the largest year-over-year increase in chain store openings among all boroughs.
With apartment developers also preparing to launch two of the biggest residential projects in the city in The Bronx during 2016, local experts believe its a case of “if you build it, they will come,ˮ for retail development.
“I think that the Bronx is a safe haven for a lot of tenants looking to get in this market because of the comparatively speaking cheap price of land and rents,” said Scott Plasky retail specialist at Marcus & Millichap.
“I think you’re going to see a slowdown in some of the top tier markets because the pricing hit a ceiling and people aren’t willing to pay what investors are asking.
“There’s a little bit of trepidation that we’re going to see a pushback now but I definitely think that the Bronx is the next bastion of real estate around here.”
“The Bronx was an area of interest for me personally because I was able to locate a large track of land at a price point that would permit construction and still have a tenant be able to pay the rent,” developer Joseph Farkas told Real Estate Weekly.
Farkas is both the president and founder of Metropolitan Realty Associates LLC, the company that transformed the former Stella D’Oro factory site in Riverdale in an outdoor shopping mall that sold for $133 million in October.
“There’s a high density, there’s disposable income and it just hasn’t been tapped by some of the national retailers because the product that’s required to put these folks into business is just not available.”
Shopping center developer Equity One built its own development in a partnership with New York City Economic Development Corporation (NYCEDC). The 133,000 s/f Broadway Plaza retail development represented a private investment of $54 million into the area from the developer in order to build the facility and accompanying covered parking spaces on 230th Street between Broadway and the Major Deegan Expressway.
Anchor tenants include TJ Maxx, Sports Authority, Party City and Aldi. During the summer, a 9,000 s/f Five Below opened for business bringing occupancy at the initial phase of Broadway Plaza to 78 percent occupied.
Blink Fitness, Starbucks, and The Vitamin Shoppe each opened for business during the third quarter in the 32,500 s/f second phase of the project. Vision Works is expected to open for business soon.
Farkas said that some retailers are starting to rethink their strategies when it comes to brick and mortar locations in New York City.
“There was an initial move where all retailers felt that there was a need to have a NYC presence really for branding purposes,” said Farkas who added that these tenants were not paying much attention to the price tag of these desirable storefronts.
“I think across the board, as pricing has considerably risen across the past five years (retailers) are looking at the bottom line and saying, we’re just not making money,” he continued.
Plasky admitted that the northern end of the island will likely never play host to a marquee flagship store. However, retailers who want a New York presence have been eager to place locations in an area that offers proximity, manageable overhead, and extra benefits.
“One of the things I’ve heard for years is that some of these retailers aren’t in New York because they have specific requirements for parking and they can’t get it (in Manhattan). Now you’re seeing huge developments going up in the East part of the Bronx and (those retailers) are coming.”
Farkas concurs with Plasky’s assessment of the Bronx’s advantages over Manhattan and said that parking has been a major selling point when marketing properties such as his Riverdale Crossing, which he developed with equity partner Angelo Gordon.
“In the case of Riverdale Crossing, the anchor tenancy of BJ’s clearly drove the co-tenancy leasing of the rest of the outdoor mall,” said Farkas. “We were able to market the BJs lease to companies like Petco, Buffalo Wild Wings, Bank of America.”
Both Petco and Buffalo Wild Wings locations were the first of their brand in the Bronx.
Both Plasky and Farkas said that the Bronx’s density and overall income stream attracts both landlords and tenants. That said, those investing in the area understand that certain brands will not even be placing a satellite store in the borough.
“There’s certain tenants that just aren’t coming,” said Plasky. “The tenants that rely on large price point transactions instead of volume purchases, they’re not coming.”
Plasky pointed to Sports Authority and H&M as brands that have already settled into the area. While strong, they are certainly not the exclusive, appointment-only jewelers and highline brands that might dot 5th Avenue.
Despite this, landlords are happy with the surge of corporate leases due to their almost guaranteed ability to survive and pay through the balance of the term. With more affordable rents, these retailers are also under less pressure to expand their profit margins just to make the brick and mortar location worthwhile.
“The upside isn’t as great,” Plasky conceded while discussing investing in the Bronx. “But there’s a lower price point to get in. More opportunity, less risk.”