A lot of thought went into whether to print such a dramatic quote on the cover of our second annual National Retail Market Report. While it’s a strong statement, the facts and figures — and the experts — suggest the market is in a truly dismal place. As news of brand bankruptcies and store closures continues to roll in daily, vacancy rates are steadily ticking upwards — on Manhattan’s upper Fifth Avenue, they topped 17 percent in the first quarter — and rents in eight of the top 10 U.S. retail strips have either declined or stagnated.
Many other experts share the sentiment conveyed on our cover. To Howard Davidowitz, chairman of national retail consulting and investment banking firm Davidowitz & Associates, “It’s a moment of reckoning. Reality has arrived, and it’s going to be very, very bad for the guys in the brick-and-mortar business.”
Meanwhile, Vornado’s Steve Roth says he believes “the only fix for brick-and-mortar retailing is rightsizing by the closing and evaporation of, you pick the numbers, 10 percent, 20 percent, 30 percent of the weakest space.” Ouch.
Those best positioned to “feed on the carnage,” in the words of Roth, will of course benefit from current conditions. But many in the industry also say that the upheaval is an equalizer that will lead to the much needed reset of an overheated and oversupplied retail market, as well as opportunities for reinvention for landlords and retailers.
In our cover story starting on page 30, we go deep into the retail crisis, talking to the biggest industry players about which owners stand to gain from today’s environment, who will get hammered and what retail will look like moving forward. We also hear from bankruptcy attorneys about how brokers can advise distressed retailers looking to optimize cash flow from their real estate assets (page 40).
On the brokerage front, we rank the top retail firms by sales and look at who facilitated the biggest retail deals that have gone down in the last year (page 10). We also talk to brokers about what they’re seeing on the top 10 retail strips in the U.S. (page 46).
As is the case in times of market transition, major tenant incentives are once more on the table (page 24), and in an effort to stay further ahead of the game, landlords are also looking to freshen up their tenant mix (page 20). The new desirable tenants offer an experiential aspect to their spaces, giving brick-and-mortar stores an advantage over e-commerce competitors. This concern over the rise of internet shopping came up again and again, as expected, in our reporting. On page 56, we speak to executives from firms ranging from Blackstone to Eastern Consolidated to get their take on its impact.
We also feature some key players in this year’s retail issue, including Zara founder and fourth-richest person on the planet Amancio Ortega (page 26), who has had tremendous success with his fast-fashion brand. And on page 66, we talk to Eight Inc. founder Tim Kobe, who has created stores for major brands from Apple to Nike and Citibank.
Enjoy the issue.