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Hodos sees nothing but happy endings for Manhattan’s retail

By Dan Orlando

If you’re going to be a headlining real estate broker in New York, it helps to have an entrepreneurial drive and an intimate knowledge of your niche.

So it’s not surprising that Richard Hodos parlayed a past-life as a flower and gourmet shop owner into his current role as CBRE’s vice chairman of New York Tri-State region retail services.

RICHARD HODOS
RICHARD HODOS

“I stumbled into it,” said Hodos while discussing his real estate career with Real Estate Weekly. “I had my own retail store which I opened at the age of 23. I had three of them; two in Pittsburgh and one in Dallas.”

While growing his business, Hodos found himself becoming very well versed in the nuances of commercial real estate. After obtaining a real estate license with the intention of dealing in residential properties, the future New Yorker began working with a developer on shopping centers.

His foray into the world of retail eventually led to projects in White Plains, New York. He landed in Manhattan in 1990 and has remained a player in the local retail scene ever since.

“I think I’ve done more deals on Fifth Avenue than any other broker in New York,” said Hodos commenting on the transactions that he’s had a hand in between Sacks and Bergdorf Goodman.

Some of the brands that he’s helped install on the avenue include Versace, AX Armani Exchange, Gant, H. Stern, and Façonnable. He also helped broker Ralph Lauren’s 38,000 s/ft lease at 711 Fifth Avenue (the Coca-Cola Building), a deal which netted him REBNY’s Most Ingenious Retail Deal of the Year Award.

However the recent shift in commercial development, which is placing copious amounts of new retail space in other areas of the borough, such as FiDi and the West Side, does not shake his confidence in the traditional epicenter that is Midtown.

“Retail tends to follow where the consumers are,” Hodos said, labeling FiDi’s growing worth as an expected result of the rebuilt World Trade Center. “It’s a pretty good story no matter how you slice it. I don’t think it diminishes the strength of Midtown at all,” continued Hodos who pointed to “historical highs” in sales numbers still being reported by brick and mortar locations in Midtown.
“None of the incremental additions — whether it’s Soho or Downtown — seem to have affected Midtown.”

Even if heavier competition outside of Midtown doesn’t dilute the neighborhood’s worth, Hodos admits that the practice of online shopping does have the potential to shake up the brick and mortar market, but brands aren’t likely to suffer a serious blow.

“There is a threat from digital,” admitted Hodos, saying that consumers do enjoy the convenience of shopping from home. But while it may take a nibble out of foot-traffic, online patronage can’t offer the full experience that the bulk of consumers are seeking when they look to patronize a brand.
“There is sort of a phenomenon,” said Hodos. “People still like to shop in physical stores.”

Hodos said that the “expert” retailers know how to create a “seamless” experience for shoppers that enjoy actually visiting a store in person but also want the convenience of being able to browse digitally.

He pointed to Macy’s as a brand that does this well and commended both their web and brick and mortar presences for having “a really good connection between the physical world and the digital world.”
According to Hodos, shoppers still need brick and mortar stores so that they can view or try on items such as jeans.

However, he conceded that repeat purchases are susceptible to be executed digitally since the consumer then knows exactly what he or she wants. On that same token, purchases of commodities are even more likely to be done digitally.

Despite the somewhat lessened need for the overhead that a physical location generates, especially in the pricy Manhattan market, Hodos doesn’t see brands ever bailing out of the borough’s storefronts.

“J.C. Penny has 1,300-ish stores nationwide. Could they chop off 500 stores and still be fine? Probably, if they still have a digital online presence,” said Hodos. “They probably don’t need 1,300 stores. The ones that will suffer though will be the small markets. I don’t think Manhattan is going to suffer.”

That said, Hodos doesn’t think many brands will keep doors open in Manhattan simply as a branding move. They expect to generate a volume of sales that makes the store itself a profitable endeavor. “99 percent of the retailers that we represent want to make money and they need to make money out of the four walls,” said Hodos. “Certainly it’s harder in New York,” he said referring to the expensive rents. “If you figure out how to run a store in New York City the rewards are very, very good.”
One store that certainly has figured it out is Victoria’s Secret.

Pointing to the lingerie chain’s attention-grabbing location in Herald Square, Hodos said that it’s the brand’s “most productive store” and said that “it does roughly the volume of a wonderful department store in a very, very good mall.”

Still, prices are rising. The climbing rents face retailers with a steeper mountain of receipts to generate, but Hodos feels that the market will be spared a bubble.

“I don’t see a bubble bursting but some of these buildings are trading at multiples that are unheard of. If the rents get to be too high, there will be a natural series of events that will unfold over a period of time,” he continued.

Hodos said that buildings will be sold on the premise that landlords can successfully charge the currently high rents for an indefinite period. If retailers do sustain a drop in business, vacancies may soon pile up, creating a temporary drop in the value of the space that had been purchased.
But he referred to the potential slow down as “part of the business cycle” rather than a “domino” situation.

“The only event that will cause something drastic to happen would be a cataclysmic, worldwide event,” he said referring to a natural disaster or a terrorist attack.
Hodos is confident that investors will perpetually want to invest in the city because it is viewed internationally as a “safe haven,” regardless of what threats brick and mortar retail may be up against.
It is that confidence that has him ready to remain at the top of the sector going forward.

Saying that every day in retail brokerage is different, Hodos couldn’t be happier with the sudden turn that his life took after walking away from his run as a shop owner nearly 30 years ago.

“I love what I do. The part that I love is working with the developer to merchandise or plan a project, or working with a retailer to make the numbers work,” he said. “I enjoy the artistic part of the process probably more so than the financial part.

“I love the fact that we have input on the final outcome and what we do actually makes a difference to these companies,” he said.

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