Two of KSI Realty NYC office's most commonly asked questions are how fast is the death of retail happening and how it might affect the Manhattan real estate landscape?
The retail market continues its summer slump as brand names officially announced quit. Gymboree, a children's apparel and clothing store, is the latest one to make headlines, while Payless Shoes filed for Chapter 11 bankruptcy back in April 2017, or the once super heavy weight electronic champion Radio Shack that had back in the 90's up to 7,000 retails locations has now officially less than a 100 stores nationwide. Even Macy's has seen its sales plummet. Opened in 1902 in Minneapolis with its flagship store located on W34th in Manhattan, Macy's sponsors the infamous parade with the same moniker as well as the 4th of July fireworks.
Near luxury brands are not immune to the retail accelerated death and the infamous Michael Kors brand is closing 1/5 of their outlets meanwhile having made headlines for its recent acquisition of the specialty luxury shoe maker Jimmy Choo for $1.2 Billion back in July 2017.
Hyper luxury brands are holding stronger as consumers seek an experience that online retailers cannot yet offer. Elevated 3D reality and drone deliveries may very well change the game and give the last straw on the camel's retail back. But for the moment, thrill seekers are flocking to Manhattan luxurious arteries such as Madison Ave., 5th Ave., 57th Street, Park Ave., Soho, Tribeca and even Williamsburg in Brooklyn.
Our brokerage has seen a lot more activities in income producing commercial deals such as office space rentals more specifically co-working spaces, mutli-family rental buildings as well as luxury hotels and restaurants that remain in strong demand in a city that never sleeps. We advise our clients to look at the cash flow value vs. the potential capital gains. Cash flow is a good indicator of the financial health of a property at the present time and although downtown and midtown trophy buildings are getting scarcer, the capital gain potential should always remain the cherry on the cake - which occurs naturally in a vibrant market such as New York City.
The Real Deal New York published an interesting article about how retail bankruptcies affect CMBS and REIT's and how little of an impact they have on them. Due to the low exposure of these financial structures, the marginal risk is nearly absent. Also, the retail distress is concentrated in particular areas and industries that are not connected to CMBS or REIT's financing. Some larger retail malls may be structured as REIT's but are close to near occupancy and often dilute their risk by selecting specialty retailers that are not affected by the mass consumption retail decline.
For more information on your next commercial or retail move, don't hesitate to contact us at email@example.com. We have off market listings and a pocket of domestic and international buyers looking for opportunistic deals in Manhattan, so feel free to reach out to us with unique offerings specifically in the Midtown East and Soho areas.
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