Short-Term Deals: Part of the Evolving Retail Market
As more tenants exhibit caution over signing long-term commitments, landlords who want to fill their spaces are agreeing to short-term leases and pop-ups. With pop-ups, which have the shortest terms—typically between one to six months—retailers use the space as a marketing opportunity to create buzz with a special, limited-time-only concept or offering. Short-term leases have a longer duration than pop-ups, but still reflect retailers’ hesitation toward taking on long-term lease obligations while they confront ongoing uncertainty in the retail market.
Manhattan has seen a sharp increase in pop-ups and short-term deals during the current market adjustment, with certain parts of the city seeing a higher concentration of short-term activity than others. Tenants are taking advantage of today’s more favorable terms to get access to locations that were prohibitively expensive or competitive during the height of the market. It is unknown if these deals will persist under different market conditions, but the current tenant-favorable retail market coupled with changing consumer tastes and spending habits indicates retailers will continue to experiment and take advantage of short-term deals and pop-ups as long as landlords are open to these lease structures.
Click here to download the New York City Retail ViewPoint
Tenants Active as Landlords Reduce Rents, Increase Flexibility
Throughout Manhattan, landlords are adjusting rents in an effort to stimulate activity. Average asking rent decreased in the majority of retail corridors in the past twelve months, and total retail sales for the five boroughs grew by 4.9% year-over-year in Q1, the highest annual growth rate for Q1 since 2014. Across Manhattan there has been an uptick in interest as a growing number of tenants across sectors are shopping space in the market, and landlords are increasingly partnering with tenants on creative and flexible deal terms.
Click here to download the Manhattan Retail MarketView Q2 2018
The Definitive Guide to Omnichannel Real Estate
Despite their ubiquity, the terms e-commerce and omnichannel are shrouded in confusion. Our new report lifts the veil of omnichannel confusion to outline how e-commerce is impacting the retail and real estate industries today and how it will shape the sector in the future. Little attention is paid to the benefit e-commerce provides retailers, including brick-and-mortar brands. But retailers that learn to leverage an omnichannel business model will be best-positioned to thrive through the current period of change.
Click here to learn more about omnichannel retailing and download The Definitive Guide to Omnichannel Real Estate
Retail Metrics Remain Positive, Despite E-Commerce Growth
Retail sales recorded healthy growth over the past quarter, with net absorption and net asking rents both increasing to 14.2 MSF and $16.93 PSF respectively. Demand remained strong for prime assets, and a limited retail supply has created opportunities for redevelopment of existing properties.
Click here to download our U.S Retail Figures report for Q1 2018
Tenants find opportunities with strong economy and declining rents
While the fundamentals of the Manhattan economy remain strong, the market continues to struggle with the disruption caused by secular changes to the business of retail. Year-over-year rents decreased along 13 of Manhattan’s 16 main corridors, while the aggregate average asking rent fell 19.5%, to reach $653 per sq. ft. Much of the decline resulted from landlords repricing space downward. Total leasing decreased quarter-over-quarter, but remains active.
Click here to download our Manhattan Retail MarketView for Q1 2018
Emerging Trends in Global Retail
The United States is an attractive global retail expansion market for a number of reasons: population, household income and average retail spend per household are chief among them. There’s also an incredible opportunity to scale and grow rapidly. While the United States is a great place for retailers to consider expanding, the factors on which they base those decisions have changed.
Click here to learn more about how international retailers are viewing expansion opportunities within the US
E-commerce retail sales rise 16% to $453.5 billion in 2017, as brands invest in omnichannel
E-commerce retail sales increased by 16% to $453.5 billion in 2017, accounting for 8.9% of total retail sales for the year, according to a U.S. Census Bureau report. The growth was due in large part to brick-and-mortar retailers' active investment in omnichannel platforms. E-commerce retail sales include both the revenue of pure-play "e-tailers" and the online sales of primarily brick-and-mortar brands. It is growth in online sales of the latter group that is driving overall growth in e-commerce sales, as providing omnichannel remains the key to success for all retail brands.
Click to read the full MarketFlash
Soft rents, strong local economy spell opportunities for tenants in 2018
Conditions in the Manhattan retail market wrapped up 2017 with both challenges and opportunities for landlords and tenants. Market fundamentals are solid, consumer confidence is high and most retailers posted strong year-over-year holiday sales. Through the year, aggregate average asking rents across the 16 main retail corridors declined by 18.4% from those posted in 2016. Availabilities ticked up slightly in the past 12 months, but remained relatively flat quarter over quarter and even backed away from peak levels. Leasing velocity was healthy through 2017, with 2.6 million sq. ft. of transactions closing, though some pullback was recorded in Q4. The most active neighborhoods in terms of space leased over the year were SoHo, Midtown West and Penn Plaza/Herald Square. As rents continue to decline, landlords are becoming increasingly amenable to tenant improvement allowances and short term leases, creating opportunities for tenants.
Click to download Manhattan Retail MarketView Q4 2017
2018 U.S. Retail Outlook
Changing demographics, consumer expectations and omnichannel retailing will continue to reshape retail and its real estate environment in 2018. The consumer trend toward off-price and discount retail will continue, with mid-range retailers seeking new ways to limit share losses to lower-priced players.
Shopping Centers to Reinvent Themselves as Simply ‘Centers” by 2030
CBRE Reveals Insights That Will Shape the Retail Sector by 2030
Shopping centers of the future will become just ‘centers’ by reinventing themselves as mixed-use destinations and adding healthcare, educational and leisure uses. According to new insights
from the Future of Retail 2030, a series from CBRE
, the firm also foresees that the focus of traditional gas stations will change as they become important mini-logistic hubs, including serving as collection points for online shoppers. Another prediction: Ownership of electric and hydrogen-powered vehicles will become more common, and there will be an increased need for fast-charging points.
“Retail will evolve at a quickening pace, reshaping the roles of the shopping center, the gas station, and the store,” said Natasha Patel
, CBRE Director, Global Retail Research. “The speed of change may catch some people by surprise, as the mindset and requirements of the consumer will evolve more quickly than the industry can adapt. This means that investors and occupiers need to get ahead of the changing trends rather than catching up.”
Declining Manhattan retail rents: The market is finding a new level
CBRE’s recent New York City Retail ViewPoint explores the phenomenon of declining retail rents and how the nation’s premier retail market is reckoning with the implications of pricing being misaligned with demand. While challenges are being created for some landlords and investors, the downward adjustments are stabilizing the Manhattan retail landscape and encouraging tenants to take advantage of a healthy New York City economy.
“Since its 2014 peak, the average asking rent among Manhattan’s main corridors has decreased by 23%—bringing rent growth between 2010 and 2017 closer to the steady trajectory of retail sales growth. This suggests that the market might be coming closer to alignment between what tenants can afford to pay and the revenue they can achieve.”
Download CBRE Retail ViewPoint
CBRE Launches Retail Innovation Hub with Five New Videos Highlighting Emerging Retail Trends
CBRE’s new Retail Innovation hub provides insight on top-of-mind trends for retailers and owners alike. Videos feature CBRE professionals examining timely topics ranging from restaurant innovators and strategies for fostering retail authenticity to the impact of social media influencers. The hub will also host CBRE research reports and other perspective pieces on innovative strategies and retail’s continuing evolution.
“Retailers, retail-center owners and our own Retail professionals must be nimble to adapt in today’s retail market. Our aim is for the analysis and perspective that we post on this hub to help them stay ahead of the industry’s trends.”
Visit the Retail Innovation hub to watch and learn
Retailers' Omnichannel Progress Belies "E-Pocalypse" Myth
While popular myth holds that pure-play e-commerce is taking over traditional retailing, our new report outlines how the opposite may be true—brick-and-mortar retailers account for roughly half of online sales and related activity. Rather than being wiped out by e-commerce, many traditional retailers have evolved into omnichannel merchants operating both online and in stores. As a result, retailers born of bricks and mortar now collectively generate slightly more than half of U.S. online sales.
“Physical retail and online sales aren’t mutually exclusive. Modern, adaptive retailers have embraced e-commerce as one of several channels to best serve customers. And shoppers increasingly research products both online and in stores before making their purchases.”
Download Manhattan Retail MarketView Q2 2017
As Rents Pull Back Across Manhattan, Market Conditions are Tenant-Favorable
Conditions in the Manhattan retail market continued to evolve in Q2 2017, exhibiting both challenges and opportunities for tenants and landlords alike. Aggregate average asking rents across Manhattan’s 16 main retail corridors declined by 8.6% year-over-year, continuing a trend that began nearly two years ago. The easing rent environment helped spur a decrease in the number of available spaces, which fell by 4.2% quarter-over-quarter, although availability remains high relative to one year ago.
“While asking rents are adjusting downward, in many parts of Manhattan, the bigger story is the increasing willingness on the part of landlords to negotiate rents and offer greater concessions to win over tenants.”
CBRE Launches New Web-based Tool “Understanding Retail Destinations”—Check out Our Findings for New York City, Ranked #4 Globally
CBRE Research is pleased to launch the reimagined Understanding Retail Destinations, a web-based tool that delivers essential data and market insights—to help users make smarter real estate decisions for retail portfolios in major markets worldwide.
Understanding Retail Destinations provides investors and retail occupiers with top-level information to better understand the structure and nature of a market, including key destinations and main players, local real estate market practices, the state of the shopping center pipeline and key economic and consumer metrics.
Visit New York City Retail Destinations
How well is New York City positioned to handle the challenges of today’s retail market?
According to our latest CBRE Retail ViewPoint, nationwide challenges have led to an increase in store closings and questions about the future of brick-and-mortar retail. New York City is not immune to these challenges but as the nation’s premier retail market, its unique characteristics and strong demand fundamentals leave it in a far better position than other locales. In New York City, the biggest challenge is high rent, and getting back to stability will require downward rent adjustments along some retail corridors.
“Local demand fundamentals remain on solid footing, but given the challenges facing retailers, landlords will likely need to continue to sweeten lease terms to help stabilize the market.”
Download CBRE Retail ViewPoint