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Call it the Amazon effect - who wants to go to SOHO to buy clothes when you can do it online! :) Edit: adding quote from the original article - > At a time wh

by nstj 9y ago

Call it the Amazon effect - who wants to go to SOHO to buy clothes when you can do it online! :) Edit: adding quote from the original article - > At a time when shoppers are buying online and fashion brands across the industry are hurting, “the challenging business environment makes it less interesting to do vanity locations,” Same phenomena seems to be happening to prime retail locations globally - take a drive down Oxford St in Sydney for example. Interested in what the solution is to clear the market on all this CRE, you can see a lot of startup/coworking spaces taking advantage of the vacancies in these initial stages.

potatolicious 9y ago
I feel like you're mischaracterizing the phenomenon, at least when it comes to NYC. This is not a product of falling demand - but rather rising prices, and landowners willing to endure extensive vacancies to prevent the market price from dropping. Increased interest in the area raised prices past the point of affordability for businesses. In a normal market this would result in price drops until landlords can find renters. What we are seeing instead is a concerted effort to maintain pricing through willingness to let storefront sit empty. Instead of lowering rents to attract tenants, landlords are simply tolerating vacancies. > "who wants to go to SOHO to buy clothes when you can do it online!" Bleecker St was home to high end fashion boutiques - a segment of retail that is still doing well in brick and mortar, and more resistant than other retail niches to the effects of ecommerce. The idea that everyone went online instead I don't think holds water. Importantly also, even if clothiers are increasingly online, other types of retail businesses (food? Fitness?) would step in to fill these spaces. This hasn't happened. >"you can see a lot of startup/coworking spaces taking advantage of the vacancies in these initial stages." This is precisely what isn't happening. Rents are too high for broad categories of businesses (including coworking spaces) - but rather than lower rents and get these spaces rented, landlords are holding firm instead.
- nstj 9y ago
  I was actually just paraphrasing the article when it came to falling demand (though I share the same view): > At a time when shoppers are buying online and fashion brands across the industry are hurting, “the challenging business environment makes it less interesting to do vanity locations,” I think it would be folly to think that there's a static or growing level of demand in physical retail relative to online shopping - even at the high end. I don't reasonably doubt that someone will be able to turn a profit with the increased rents, or that landlords don't want to drop the rent for a multitude of reasons (financing requirements included) but my point is that we're in a period where the sectors which typically could afford the high rents in places like these now can't. And my statement holds just as much for NYC as it does for other cities in the world - I was simply providing the Australian example as support. Remember when Virgin could afford renting half of Union Square to sell physical music? After it was empty for a while (much like Bleecker St) the DR and banks stepped in with a business which could afford the rent.
deleted 9y ago
[deleted]
chimeracoder 9y ago
> Call it the Amazon effect - who wants to go to SOHO to buy clothes when you can do it online! :) That's not the effect that's happening here. In fact, a number of brands that have built their reputations online have recently (in the last few years) opened up brick-and-mortar stores in SoHo, and done quite well. Warby Parker and Birchbox are two examples. The problem, as the sibling comment notes, isn't that people don't want to go to brick-and-mortar stores when they can buy clothing online. The problem is rather specific to New York (and particularly Manhattan) real estate, which is why we have the paradox that brick-and-mortar stores along some streets are closing and staying vacant, while their competitors are opening up new (successful) stores literally two blocks away.
- nstj 9y ago
  Interested in makes you think these phenomena are particular to CRE in the city?
crispyambulance 9y ago
> Call it the Amazon effect - who wants to go to SOHO to buy clothes when you can do it online! :) That might be true for some male demographics, but clothing is still very much a try-and-buy experience for everyone else. People who drop several hundred to thousands for an outfit aren't going to do it online anywhere near as often as in person at a boutique. As others have noted, the demand is still there, but rents have gone so insanely high that even these rarefied boutiques can't hack it. The rent will, eventually, correct itself. A lot of rich people are going to lose money in real-estate and they deserve to. Hopefully more normal business can move back in-- and Magnolia Cupcakes were nothing to write home about anyway, they were just freaking cupcakes for christs sake.
- Eridrus 9y ago
  > People who drop several hundred to thousands for an outfit aren't going to do it online anywhere near as often as in person at a boutique. Plenty of people pay hundreds or thousands of dollars online for single items, largely because of the rise of free returns which make it risk-free to try the item on. Not to say everyone prefers online shopping - my wife certainly doesn't, but I would want to see some actual stats saying high end shoppers prefer retail at a greater rate than low end shoppers; I don't expect the correlation to price point to be as strong as to whether they have free return shipping :)

by nstj 9y ago

potatolicious 9y ago

I feel like you're mischaracterizing the phenomenon, at least when it comes to NYC. This is not a product of falling demand - but rather rising prices, and landowners willing to endure extensive vacancies to prevent the market price from dropping. Increased interest in the area raised prices past the point of affordability for businesses. In a normal market this would result in price drops until landlords can find renters. What we are seeing instead is a concerted effort to maintain pricing through willingness to let storefront sit empty. Instead of lowering rents to attract tenants, landlords are simply tolerating vacancies. > "who wants to go to SOHO to buy clothes when you can do it online!" Bleecker St was home to high end fashion boutiques - a segment of retail that is still doing well in brick and mortar, and more resistant than other retail niches to the effects of ecommerce. The idea that everyone went online instead I don't think holds water. Importantly also, even if clothiers are increasingly online, other types of retail businesses (food? Fitness?) would step in to fill these spaces. This hasn't happened. >"you can see a lot of startup/coworking spaces taking advantage of the vacancies in these initial stages." This is precisely what isn't happening. Rents are too high for broad categories of businesses (including coworking spaces) - but rather than lower rents and get these spaces rented, landlords are holding firm instead.

nstj 9y ago
I was actually just paraphrasing the article when it came to falling demand (though I share the same view): > At a time when shoppers are buying online and fashion brands across the industry are hurting, “the challenging business environment makes it less interesting to do vanity locations,” I think it would be folly to think that there's a static or growing level of demand in physical retail relative to online shopping - even at the high end. I don't reasonably doubt that someone will be able to turn a profit with the increased rents, or that landlords don't want to drop the rent for a multitude of reasons (financing requirements included) but my point is that we're in a period where the sectors which typically could afford the high rents in places like these now can't. And my statement holds just as much for NYC as it does for other cities in the world - I was simply providing the Australian example as support. Remember when Virgin could afford renting half of Union Square to sell physical music? After it was empty for a while (much like Bleecker St) the DR and banks stepped in with a business which could afford the rent.

deleted 9y ago

[deleted]

chimeracoder 9y ago

> Call it the Amazon effect - who wants to go to SOHO to buy clothes when you can do it online! :) That's not the effect that's happening here. In fact, a number of brands that have built their reputations online have recently (in the last few years) opened up brick-and-mortar stores in SoHo, and done quite well. Warby Parker and Birchbox are two examples. The problem, as the sibling comment notes, isn't that people don't want to go to brick-and-mortar stores when they can buy clothing online. The problem is rather specific to New York (and particularly Manhattan) real estate, which is why we have the paradox that brick-and-mortar stores along some streets are closing and staying vacant, while their competitors are opening up new (successful) stores literally two blocks away.

nstj 9y ago
Interested in makes you think these phenomena are particular to CRE in the city?

crispyambulance 9y ago

> Call it the Amazon effect - who wants to go to SOHO to buy clothes when you can do it online! :) That might be true for some male demographics, but clothing is still very much a try-and-buy experience for everyone else. People who drop several hundred to thousands for an outfit aren't going to do it online anywhere near as often as in person at a boutique. As others have noted, the demand is still there, but rents have gone so insanely high that even these rarefied boutiques can't hack it. The rent will, eventually, correct itself. A lot of rich people are going to lose money in real-estate and they deserve to. Hopefully more normal business can move back in-- and Magnolia Cupcakes were nothing to write home about anyway, they were just freaking cupcakes for christs sake.

Eridrus 9y ago
> People who drop several hundred to thousands for an outfit aren't going to do it online anywhere near as often as in person at a boutique. Plenty of people pay hundreds or thousands of dollars online for single items, largely because of the rise of free returns which make it risk-free to try the item on. Not to say everyone prefers online shopping - my wife certainly doesn't, but I would want to see some actual stats saying high end shoppers prefer retail at a greater rate than low end shoppers; I don't expect the correlation to price point to be as strong as to whether they have free return shipping :)