The city has a host of neighborhoods whose retailers have gone from mom-and-pops to pop-up shops in a New York minute, and commercial brokers could be forgiven for blinking.
Some brokers say they’re fielding a larger volume of calls from retailers seeking temporary space called “pop-up shops,” which open for at most a few months, but typically only a few weeks.
Unilever and JVC, a subsidiary of Victor Company of Japan Ltd., are two global giants who’ve opted for short-term store spaces. Smaller retailers, such as Icelandic clothing line 61degreesNorth and Japanese clothing line Uniqlo, among others, have also leased temporary spaces.
“The industry is growing,” said Greg Gropper, a managing director for Newmark Knight Frank. “There are more pop-up retail concepts coming to the market, though I don’t think that it’s the retail broker making it happen.”
Most retail brokers shy away from them as a losing business proposition, with not enough money changing hands to be worth the time spent arranging the deal.
“Somebody called wanting to do a make-your-own sandals store on Spring Street,” said Chase Welles, a senior vice president at Northwest Atlantic Partners. “We may do it.
But I will tell you how I think brokers would typically deal with that, which is that they don’t. There’s no money in it for anybody.” But retailers seem to be finding pop-up shops more attractive. If brokers deal with pop-up shops at all, they prefer smaller retailers, who are often looking for holiday space and have firmly defined sales goals that show a clear connection to the rent of their temporary quarters.
“Companies like H & R Block, and companies like Christmas decorations or Halloween stores, are much more rent-sensitive,” said Jeffrey Roseman, executive vice president and principal of Newmark Knight Frank. “They’re selling product, and they know how much they can sell, and how much rent they can pay. Their name in lights doesn’t mean anything to them.”
However, his clients also include companies that have deeper pockets. J.C. Penney plans a 15,000-square-foot temporary store at One Times Square — the building where the New Year’s ball drops — on Mar. 2 to showcase new apparel and home furnishings brands.
“I get calls once a week for pop-ups for One Times Square from the biggest companies, and we’ve always said ‘no,'” Roseman said. “But J.C. Penney is doing a huge new marketing campaign, so they just kept coming back and coming back, and finally we made a deal with them for about a month.”
Roseman said the deal is good for Newmark because it promotes the space — and keeps a sign advertising the space for lease in the store window.
“It’s not a great way to make money for a broker,” he said. “It’s a very minimal commission. But what it does, if you’re an agent for the property, it doesn’t hurt when there’s a picture in the Wall Street Journal. That helps us on all the deals we’re negotiating. It proves how high-profile a spot is. People will still know the space is available for rent.”
Gropper agreed that pop-up shops can sometimes benefit both the tenant and the landlord. As a best-case scenario, a deal in the works to lease a space may take about two weeks, so the landlord could benefit from leasing the space in the very short term.
“Some of the bigger landlords have a cash flow that, whether or not it’s vacant or rented for a week, it doesn’t really matter,” Gropper said. “Unless it’s just such an interesting idea or a name company that’s going to give the property additional recognition. A landlord on a side street or in a less visible area is going to be more apt to want to collect income for a short period.”
Over the holidays, Gropper found a 2,000-square-foot home for Microsoft Corporation for a month, in a spot off the beaten track at 10 East 22nd Street; the company promoted a new software program by allowing customers to walk in and use a bevy of computers.
“They were very pleased with the amount of pedestrian traffic they got,” Gropper said.
Generally, landlords prefer long-term clients. While a security deposit eases concerns, sometimes retail landlords are wary of temporary tenants taking space and refusing to vacate on time. Or there’s the fear that short-term tenants may alter the space in some way.
“If some retailer wants to do a pop-up immediately, it’s OK,” Roseman said. “If it’s too far down the road, no landlord wants to think that their space will be on the market that long.”
Jonathan Daou, creative director of Open House, a real estate marketing and consulting company in Soho, said brokers have to seek other than financial rewards from handling pop-up shops. Daou found a Soho space for Italian coffee powerhouse Illy to open a temporary shop for three months in late 2005, though the company leased the space for eight months total to prepare the store in full.
“That deal was a headache,” Daou said. “But I love the coffee. And they were a good client, and I was more worried about making the relationship for the future. Some day, these people might open up Starbucks-style Illys all over the place.”
Jeff Cohen, business development director of Inwindow Outdoor, which specializes in advertising on storefronts that would otherwise be vacant, often deals with prospective pop-up retailers, which he says sets him apart from an older generation of brokers.
“They’re a little bit more apprehensive about getting involved, or view it as a distraction,” he said. “But more and more, it’s becoming the norm, and some brokers are embracing it and realizing it’s another source of revenue.”