By Kelly Gedinsky,
As the year comes to a close and the New York ICSC is upon us, it is a fascinating time to be a retail broker.
We all find ourselves in the position of being the real estate expert at holiday parties and are all too often bombarded with an onslaught of opinion and questions:
How is the market? Why are there so many retail vacancies in my neighborhood? Why isn’t my apartment selling? What’s wrong with my co-op? Why is the building across the street from me being torn down?
My favorite diner just closed and I hear there is a bank replacing it, can’t you find someone better?
The retail market is in a state of change and those of us who have successfully navigated the ups and downs of the industry realize that challenge presents opportunity.
We haven’t seen a market of declining rents and high vacancy rates since the 2008 collapse, but thankfully, that cataclysmic sequence of events created a longer more dismal environment than the state of today’s market.
This isn’t 2008. Our world has changed a lot since those chaotic financial times mostly because access to information has increased significantly.
Ten years ago, a majority of us were still reliant on our Blackberry’s. The smart phone had not changed the way we had access to information. Today, we know the breaking news in real time no matter where we are thanks to those devices and apps.
Tenants, landlord’s and brokers alike are all reading the same stories that are based on empirical data and less on opinion.
When Bear Stearns failed in March of 2008, there was a sense of fear, but most had no clue what was coming in the fall. And as vacancy rates rose, rents didn’t drop until it was too late.
In today’s era of high vacancies, landlords’ view of the world is very different. Even though the economy is stronger, unemployment is at a record low, and consumer confidence remains high, landlords are realizing that rents have not dropped enough to fill the available space. Corporate profits are robust, and the lower tax rates and less regulation have offset the concern about tariffs and protectionist rhetoric somewhat, the savvy developer understands that today’s retail uncertainty will only be mitigated by flexibility.
That’s why we are engaged in discussions about “reinvention,” “non-traditional,” and so-called “experiential retail.”
In today’s market, Landlords are more flexible than ever, willing to consider short-term deals, unprecedented rent concessions, and healthy TI packages while also considering the quality of tenant versus inflated rent numbers.
On the flip side, tenants are considering co-branding to create new senses of place to attract new and old customers.