How the Airbnbs of retail are growing in a pillowy soft market

More startups are trying to match shopkeepers and spaces

TRD New York /
Aug.August 18, 2017 05:47 PM

Behind the storefront of the Michele Varian boutique in Soho lies a store within a store.

Past the shop’s collection of industrial-chic lamps, brightly colored throw pillows and quirky design items, fellow Soho designer Melissa Joy Manning runs her eponymous jewelry boutique underneath a skylight at the rear of the roughly 2,000-square-foot sales floor at 27 Howard Street.

The space-sharing arrangement, which in the world of retail real estate is usually referred to as a licensing agreement, started roughly five months ago after Manning lost her space at 12 Wooster Street and was looking for an economic solution to a real estate problem that many retailers face.

“There was no way she’d be able to start over again in Soho with the current rents,” said Varian, who had arranged licensing agreements before, mostly by word-of-mouth, or what she dubbed “analog style.”

Now Varian is working to bring the world of retail matchmaking digital.

She teamed up with Jay Norris, a childhood friend from Detroit and principal behind the commercial real estate consulting firm Lifestyle Equities, to develop, a sharing-economy platform for retailers akin to Airbnb for short-term rentals or Uber for ride-sharing.

“Tenants have decided they need to maximize their commercial space: every square foot and every square inch,” explained Norris, the company founder. “The only way to scale this is to build a marketplace for it.”

Varian now has a 250-square-foot mezzanine space at her store asking $2,500 per month listed on the site, which has more than 300 listings on it since a soft launch last month.

Retail has seen rising interest from sharing-economy “disruptors” that have impacted other major food groups in real estate like Airbnb has on hotels, WeWork and its many imitators on the world of office, and companies like WeLive and Common when it comes to apartments.

The Williamsburg-based startup Bulletin, which reportedly raised $2.2 million in venture capital funding earlier this year, lets retailers rent space out to other brands, ranging from a portion of the sales floor to even a few shelves on the wall.

San Francisco-based Storefront focuses on short-term pop-ups and boasts more than 1,500 listings. The company’s raised $8.9 million so far, according to Crunchbase.

And Appear Here, a U.K.-based startup that’s raised $21.4 million, opened its first New York City office in January and launched its site in the Big Apple in April.

The space is fertile ground these startups, as retail brokers are usually less interested in doing pop-ups, where the economic incentive is nowhere near as strong as it is for doing long-term deals.

“I think that they’re figuring out ways to efficiently manage what was a bit of an inefficient market,” said Mark Tergesen, a retail broker at ABS Partners.

And now is a particularly good time to be in the pop-up-facilitating business, as the city deals with a deluge of empty storefronts and available spaces. In trendy shopping areas like Soho, the Meatpacking District, Herald Square and Madison and Fifth Avenues, the availability rates are above 20 percent, according to Cushman & Wakefield.

But the startups may very well be the anecdote for the very conditions that have allowed them to proliferate.

“Pop ups are very active now in filling space,” CBRE’s Richard Hodos said. “Pop ups tend to come in lay groundwork for a retail recovery.”

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