Real Estate Weekly
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Mom and Pops smell coffee as chain stores eat into New York City

By Dan Orlando

All New York shoppers want this Christmas is a chain store.

According to the State of the Chains report from the Center for an Urban Future, the number of chain store locations in New York City jumped 3.3 percent this year.

In the biggest climb since a 2009 chain store boom, brands like Dunkin Donuts, Metro PCS and Chipotle bulldozed their way into the city in a blaze of real estate-eating franchises.

Dunkin Donuts has 536 locations in NYC.
Dunkin Donuts has 536 locations in NYC.

“I think it’s just a natural evolution. I think what you’re really seeing is the demise of the small mom and pop that doesn’t have the efficiency of scale,” said Joanne Podell, vice chairman at Cushman & Wakefield.

Podell said she believes that the success of chains in the city signals a cultural shift amongst residents and said that companies that are enjoying the most success are triggering “acceptance of (their) brand by the community.”

“There’s a shift in shopping habits and that comes from millennials and the experience of shopping and the lifestyle of people that want to live in urban markets. “ Podell said. “These chains they do a great job of understanding the customer and who they are and where they’ll be in five years.”

Podell feels that chains that opt to embrace the unique flavor of each location’s surroundings may be well served.

JOANNE PODELL
JOANNE PODELL

While appealing to local patrons is certainly wise, the chain that has boasted the most locations in the city for the past seven years does not follow that model.

In 2014, Dunkin Donuts produced a four percent net gain in stores throughout the five boroughs, increasing the grand total by 21. Each of the coffee giant’s 536 locations is virtually identical with little to no variation in design or color scheme from store to store.

“I would suggest that it’s a franchise model which their direct competitors don’t follow that allows them to be entrepreneurial and get the most access to markets,” said Matthew J. Gorman, managing partner and co-founder of New Street Realty Advisors.

Gorman said he feels that the brand’s simplicity and behind-the-scenes business model outweighs a need to create a homey and local environment for patrons.  “It’s also their flexibility and design and prototype which allows them to fit into spaces that their competitors wouldn’t otherwise entertain.”

“They’re a strong draw so possibly they could take a good side street but they don’t often do that,” senior managing director of Sinvin Real Estate, Steve Rappaport added.

Other chains that performed strongly in New York this year included T-Mobile (187 locations), 7-Eleven (139 locations), L’Occitane (23 locations) and Tiger Schulmann’s (11 locations).

Rappaport stressed the importance of location and access to foot traffic for all brands attempting to operate a physical location in New York. Both he and Podell and Rappaport said brands such as Coldwater Creek, Cold Stone Creamery, Ashley Stewart and Crumbs Bake Shop — which all closed stores this year — may have found its way in New York if it had been more in tune with where it’s target market was likely to shop.

While this marks the sixth consecutive year there has been a net increase in the number of national chain stores in the five boroughs, other headliners to depart included Juicy Couture and Goodburger.

Should any of the shuttered brands opt to return, they will likely consider setting up shop in Queens, which saw a larger year-over-year percentage increase in chain store volume than any of the other boroughs. The number of national chain locations in the borough was bumped 8.3 percent, which brought the grand total from 1,663 stores to 1,801 stores as 2014 comes to a close.

Queens was followed by the Bronx , which saw a 4.2 percent pump and a climb from 877 to 914 stores.

Steve Rappaport
Steve Rappaport

Brooklyn and the Manhattan rounded out the boroughs that saw growth with Staten Island actually failing to report any change to last year’s number of retail locations, 425.

The stats also show that mobile phone retailers were hot, with metroPCS growing by 37 stores this year and T-Mobile adding 26 as well.

As 2015 is set to begin, the outer boroughs are likely to continue leading the way in this area as dense populations coupled with lower rents are a recipe for profitable storefronts.

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