As the capital of hipster New York, Williamsburg has long been home to a bevy of small boutiques alongside its many bars and restaurants. But until now, large national retailers have shied away from the former Brooklyn industrial area.
That’s starting to change, however. Now that major retailers like Whole Foods are opening in the area, other mainstream brands are clamoring to get into the hip neighborhood, too.
“This year, there has been a new level of acceptance of Williamsburg as a prime spot for business,” said David Leiter of the Williamsburg-based brokerage Leiter Real Estate Group. “Whole Foods was the stamp of approval on the neighborhood as an area retailers needed to be in.”
The shift is also due in part to changing demographics in Williamsburg, which has long attracted twentysomething singles. As the city emerges from the downturn, pricey condos and rentals are now filling up with wealthy families, who in turn are attracting high-end retailers.
“As more and more families come into the neighborhood, more and more family-oriented and mainstream retailers are coming to meet that demand,” said Timothy King, the managing partner of Brooklyn-based commercial firm CPEX Real Estate Services.
Demand on the rise
Retail interest in Williamsburg has been spurred by skyrocketing residential prices: According to the brokerage MNS, studios in June were renting for an average of $500 more per month than last year.
“The residential side of Williamsburg has really established itself — Bushwick and Ridgewood are being gentrified because of it — and there’s a stronger density of residents now,” said Ryan Condren, managing director of retail leasing at CPEX. That, in turn, “provides a consistent flow of foot traffic to the mainstream retailers.”
According to brokers, the floodgates opened in March, when Midtown Equities and other investors signed a deal to buy 242 Bedford Avenue, where they plan to develop a $40 million, 150,000-square foot complex with a Whole Foods, luxury apartments, a Citibank and a New York Sports Club. The complex is currently slated to open in 2014.
That deal has prompted other mainstream retailers to seriously consider Williamsburg, brokers said.
Williamsburg Cinema, a new movie theater being built at Driggs Avenue and Grand Streets, will have seven screens and 1,000 stadium seats, giving movie-goers a more mainstream alternative to the artsy, smaller Nitehawk Cinemas, which opened this summer.
And sources say clothing behemoth J.Crew is considering taking space at 247 Bedford Avenue, a recently renovated, 35,000-square-foot space with 13 retail storefronts available for rent. The site — which offers some of the largest retail spaces in Williamsburg — started leasing this summer, with asking rents between $185 and $200 per square foot.
Lee & Associates’ Peter Levitan, one of the listing brokers at 247 Bedford, declined to comment specifically about J.Crew, but said his team has been in talks with “fashion brands” and several “notable restaurants” about taking space in the complex.
He added that the project’s owner, a partnership led by Red Sky Capital, wants “established tenants,” but also retailers who are right for the neighborhood; to that end, “we’re focusing on edgier, younger concepts,” he said.
Ultimately, Levitan expects the complex to be a “mix of furniture, clothing, accessories and restaurants.”
Furniture is an especially fast-growing sector of Williamsburg retail, brokers said.
“All those new residents need furniture,” said Condren. “Stores like Raymour & Flanigan are looking in Williamsburg. Pier 1 Imports has a rapid expansion plan, CB2 was at one point looking in Brooklyn. They’re all entertaining the [idea of the Williamsburg] market.”
Pier 1 Imports spokesperson Jennifer Engstrand said the chain is “exploring options for a store location in Brooklyn, New York, for 2013, but no location details have been announced.” Raymour & Flanigan and CB2 did not respond to requests for comment.
Of course, ultimately, they may not all open locations in Williamsburg, Condren noted; not all stores are a good fit for the hipper-than-thou ’hood. For example, sources said the discount clothing retailer T.J.Maxx has looked at 242 Bedford and other spaces in Williamsburg, but a broker with knowledge of the deal said the chain isn’t presently planning to move into the neighborhood.
Williamsburg is “never going to be Madison Avenue, with Coach and Burberry,” Condren said. “But there’s too much noise about Williamsburg for retailers not to look.”
Some mainstreamers are looking to blend with the hip neighborhood by putting a local spin on their brands. The Duane Reade at Bedford Avenue, for example, has a growler bar with local beers on tap.
As a result of this increased demand, the hottest retail corridors in North Williamsburg — Bedford and Driggs avenues and Berry Street — have seen their asking rents increase.
On Bedford, listing rents are now up to $175 a foot, with deals closing around $150 per square foot, Condren said. Eighteen months ago, rents were closing at just around $100 a foot.
Berry and Driggs are pulling in rents of up to $60 per square foot — up from around $40 just a year and a half ago, he said.
Even off the main drags, demand for Williamsburg space is on the rise, brokers said.
“You’re now seeing the places off Bedford filling up in the Kent and Wythe area,” Leiter said, adding that the traditionally Hasidic part of Williamsburg, the South side, is now starting to see the rapid restaurant and bar growth that first characterized North Williamsburg’s rise.
Getting creative
Until now, one of the major obstacles to retail development in the area was the lack of available space.
According to King, most of Williamsburg’s existing retail stock is in 20-by-100-foot-wide buildings — with only 1,500 to 1,800 square feet of “real, usable space.”
Those small spaces work well for boutiques, but many national retailers require more square footage.
“Nothing is large enough to take care of the nationals, that’s the problem,” Kalmon Dolgin’s Neil Dolgin said.
But with so much demand for stores in the area, retailers are now looking for ways to overcome these obstacles by leasing less-than-prime space on second floors and basements.
For example, Condren brokered a deal for Retro Fitness, a national chain of gyms, which opened a 25,000-square-foot facility at 203 Berry in February, with much of its space underground. So far, it seems to have paid off. “They’re breaking all their projections for memberships,” said Condren.
King noted that retailers’ willingness to accept “odd configurations, lower- or upper-level real estate is a sure sign of a market in high demand. There’s a strong desire to get into a certain marketplace, so when they can’t find a classic space, they’re going to compromise to get into that market.”
Another solution is for developers to assemble multiple properties.
One particularly large assemblage is nearly a full city block bound by North 4th and 3rd streets, Driggs and Metropolitan — which was purchased in April by Waterbridge Capital’s Joel Schreiber for $68 million.
The developer reportedly plans to build a 245-room boutique hotel and renovate the 50,000-square-foot space — which previously housed a bagel shop, laundromat, supermarket and hookah bar —in hopes of attracting prominent retailers.
The project is “a block away from the Whole Foods,” Condren said, “so it’s really going to be ground zero for where you’re going to see big box, prime, national tenants.”