The Real Deal New York

Pop-ups pop up in the Hamptons

May 19, 2009 10:52AM
By C. J. Hughes

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For proof that the recession has pummeled retailers in upscale areas, consider the fate of East Hampton.

By January, brokers say, an unprecedented half-dozen stores were shuttered along Main Street and Newtown Lane in the town, which is the heart of the Hamptons, the tony summer getaway on Long Island’s Eastern End.

Worsening their situation, landlords on those streets, which brokers say can command
up to $200 a square foot, for months have seemed reluctant to lower prices to fill
empty berths

But now, with summer just weeks away, property owners are relenting; they’re offering dramatically shortened leases to lure penny-pinching tenants. These leases, which historically lasted 10 years, can now be had for as short as five months.

Retailers who take these mini-leases are known as “pop-up stores” for their ability to speedily put down and take out tent stakes. Four have opened or are slated to open in East Hampton, including Hermes (63 Main Street), Michael Kors (48 Main Street), Brooks Brothers (54 Main Street) and Trina Turk (79 Main Street). Jimmy Choo will also open a pop-up store in East Hampton at a yet-to-be-determined address, brokers say, though store officials didn’t return a call for comment.

Also, in nearby Southampton in April, Diane von Furstenberg has debuted a pop-up store at 53 Jobs Lane.

The trend “is definitely a function of the economy,” said Michael Stone, a senior director with Cushman & Wakefield, who has brokered retail deals in the Hamptons. “If demand is soft, and landlords think they can get a better lease next year, they may sign up a tenant short-term, just to get somebody in there.”

Though they could miss out on a chance to lock in a low rent, many retailers like pop-up leases because they allow test runs of new markets without long-term commitments, said Robert Chavez, the chief executive of Hermes USA, whose East Hampton store, which will be the company’s first in the Hamptons, opens tomorrow.

The store, which will sell beach bags, sandals and bathing suits, will occupy a 2,000-square-foot space until September 20.

For years, “we had been talking to landlords out in Southampton and East Hampton, but we weren’t ready to make an investment,” said Chavez, who declined to say what rent he’s paying. This “is a great opportunity for exposure.”

Stores that depend on customized interiors to help brand their products shy away from pop-up leases, brokers say, as their short length usually discourages expensive build-outs. But Hermes, for one, is bending the rule. Its East Hampton store will feature a more stripped-down look than its other 22 U.S. stores, three of which are in New York City.

“We will basically just clean up,” Chavez said.

What tenants might lose in branding potential, though, they can clearly gain in reduced risks, said Joel Isaacs, president of Isaacs and Company, a Manhattan-based commercial brokerage specializing in fashion that also has Hamptons clients.

Indeed, in a robust market, where landlords fetch $200-per-square-foot annual rents, a typical lease for a desirable East Hampton store could put tenants on the hook for $4 million for a 10-year commitment, versus $165,000 for a five-month pop-up.
 
“You’re limiting your liability,” Isaacs said. “You can leave, you can stay, you can close up.”

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