For all its strengths, even New York has felt the impact of online
retailing. Rizzuto, for instance, says the type of experience to
which Amazon has gotten the marketplace accustomed is much
more streamlined than browsing the aisles of brick-and-mortar
locations. “People all know now you can sit on your couch and
order just about whatever you like,” he says.
The Amazon effect has been an undeniable factor in local retail.
After filing its second bankruptcy, Radio Shack closed 552 stores
nationwide, including 25 locations in New York City and Long
Island. Similarly, America’s largest bookseller, Barnes & Noble, in
September reported that in Q1 of its FY 2019, its total sales of $795
million declined 6.9% compared to the prior year. Its closure of its
bookstore in the Bronx in 2016 marked the departure of the last
general interest bookstore in the borough of 1. 5 million people.
Fortunately, instead of seeing the Internet as competition,
retailers are learning to embrace it. “You can’t even be a little hardware store on the avenue without a website, without a way to order
something instantly. This change in retail has forced people to
learn about the Internet and do things online,” says Consolo.
CBRE’s February 2018 US MarketFlash report attributes some of
the rise in Internet sales—the US Census Bureau reports that
online sales accounted for $453.5 billion, 8.9% of total retail for
2017—to retailers’ omnichannel efforts, selling product online.
Of course, the reality is more nuanced than that. “The outlook
for retail space is driven not so much by class designation as the
type of product,” says Chandan Economics founder Sam Chandan,
whose current CV also lists posts as chair of NYU Schack Institute,
partner at Capri Capital and a professorship at the University of
Pennsylvania’s Wharton School. “In terms of the degree of substi-
tution from bricks and mortar sales to online sales, it’s not as much
the quality of the retail space as it is about the type of product
that’s being sold,” says Chandan. “So, when we look at electronics,
when we look at books, these are two assets, two product categories
where we see the clearest substitution with online sales.”
And it is a hard fact that regardless of innovative ideas and the
possibilities of the Internet, 13 major retailers filed for bankruptcy
this year “with more on the horizon,” according to Cushman &
Wakefield’s September 2018 US Macro Economics Report.
These bankruptcies have had their inevitable effect on retail
real estate: large department stores are leaving malls and while
class A properties can backfill, class B properties are looking for
tenants who generally gravitate to power centers—all of which
increases the “discounter environment” of the shopping center,
Cushman & Wakefield said. As for the class C properties, they are
in an “increasingly dire” situation where “death spirals appear to
be ramping up,” according to the report.
More so than many other cities, there is a good chance that
much of New York’s struggling retail spaces will find a way to survive. Brown, for example, envisions that a more urban-feel, subur-ban-village concept will reinvent dying malls. Instead of a million
square feet of pure retail, he sees possible multifamily, office and
retail components. Mixed-use hospitality, medical centers and educational facilities could integrate with retail that is challenged.
Another trend predicted to bolster brick-and-mortar retail is a
stronger blend of offline and online services in grocery stores, says
Rizzuto. He points to Amazon’s purchase of Whole Foods, and
ShopRite’s “shop at home” concept as examples. He also sees
stores like Target and Walmart continuing to expand their food
sections to improve the one-stop-shopping experience.
In particular, Consolo points to beauty, health and discount
stores as growth areas. The beauty sector has been successful in
generating persistent demand which has led to the opening of
more brick-and-mortar locations. Consumers are also prioritizing
health and embracing the concept of athleisure. “The ‘
sneaker-ization’ of our culture is part of the growing influence of casual
and streetwear,” says Consolo. She points to the rise of sneaker
culture with fashion moving away from the strict categorizations
of formalwear and streetwear. Plus, malls are finding new life with
health and fitness clubs opening in vacant spaces, she says.
Consolo sees off-price models, like Nordstrom Rack and
Neiman Marcus Last Call, along with traditional discounters
such as TJ Maxx continuing to attract shoppers with the lure of a
“treasure hunt.” This is an activity that customers cannot replicate online, she says. ◆