“Death By Amazon”- Does the Retail Landscape Affect the NYC Residential Market?
Someone once told me that “In New York, the hard stuff is easy, and the easy stuff is hard.” It would seem that the easy stuff is getting a lot easier these days: Renting a car (Zipcar), shlepping to the grocery store, shopping in general, or just about every other technology that has made life easier for everyone also is a big boon to New Yorkers.
We’ve been watching and reading about the 800-pound gorilla, Amazon, buying up retailers like Whole Foods, and essentially crushing retail in myriad ways. Haven’t we all luxuriated in avoiding the local hardware corner store? Just the time saved hunting around for some specialty item in Manhattan is a life changer. I have often said that there has never been a better time in the history of the world to be a shut-in. Replace “Shut-in” with “New Yorker” and it still holds true. So many start-ups try out their ideas in Manhattan, whether it’s to disrupt the bedsheet industry (Brooklinen – get it?), dating apps, or anything else.
I’ve come to eat all of your organic kale. And your retail stores.
We read that stores are closing left and right while others feel there is opportunity, buying up lots of real estate where there are shuttered stores. The facts are out there that retail rents are way down, sometimes 30-40% in Manhattan. Other articles bemoan the closings of lots of malls. Or the loss of “anchor tenants,” the biggest draw to a mall or a big office building, signaling the impending death of a particular location. Yes, malls have to shift their strategy to stay alive, or developers have to recreate them into old-age facilities with surrounding retail. Or find other creative solutions that incorporate residential components into the project. Either way, the malls are less of an issue from our perch here in Manhattan and Brooklyn.
The question I have is: Does this changing retail landscape in any way impact the way New Yorkers think about their neighborhoods? Does it impact residential real estate as the retail landscape changes?
Of course some of the things that makes a neighborhood unique is its variety of housing stock and architecture, while the local restaurants and stores are critical to a particular flair and flavor. How people carry themselves in a neighborhood, whether people are dressy, whether there are more families or fewer.
Restaurants come and go, stores’ leases run out, tastes change. No question that nostalgia plays a role in having people think that New York City is forever lost, and that the current iteration is really just “fake New York.”
All that said, there is a LOT of vacant retail, and however you slice that, it’s a bummer to live in a neighborhood without a vibrant landscape. Let’s run through the undercurrents affecting retail:
Obviously- People buy more things, almost everything, on Amazon.
Big box stores popping up even in cities like New York. Think: Costco; Home Depot; Lowe’s; Michael’s; TJ Maxx; actually, Wal-Mart is the only one being kept at bay, even in areas that are underserved like Kingsbridge that could have used the retail.
Fast Food and Fast Casual retail has grown, pushing out smaller one-off restaurants. Think: Sweetgreen; Chipotle; Five-Guys; and on and on. Scale is the enemy of smaller restauranteurs.
There are a million startups to disrupt different industries. Think Casper- your local Sleepy’s is getting beat up;
People keep spending money on restaurants. Yes, you can count on lots of restaurants opening and closing in your neighborhood, even those neighborhoods that weren’t known for good food. I’m thinking specifically about the Upper West Side, where you have at least 10 new Asian restaurants: Two hot pot restaurants, amazing Szechuan spots, and lots of Ramen specialty stores, not to mention a Korean supermarket coming in on 110th and Broadway. Not to mention bubble tea and boba pop-ups everywhere.
Renters and owners want washer/dryers in their apartments and buildings- certainly to justify the rents, landlords are keen to help out. This kills laundromats, not to mention the realities of rents
Grocery Delivery continues to crush grocery stores in New York.
Specialty stores are getting hurt by the internet in all forms, not just Amazon.
Brick and mortar Electronics and computer stores are getting beat up by the growth of mobile, and the slow death of the PC
Banks have too many retail locations
Proliferation of extremely high-end food courts, even in locations like the Columbus Circle Station at 59th street (which is amazing by the way)
These are just a few things going on. Here are the places I see the interplay of retail and residential:
Gyms. If you have a great gym near your apartment, that generally is a major plus for a lot of people and adds to property value.
High-end Malls- I’ll be very curious to see how the High-End malls add to locations like Waterline Square (58th-63rd on Riverside Boulevard) or Hudson Yards. I think this solidifies them for tourists and part-time residents first, then fills in for full-time residents. Seems like it will be a net positive for property values.
High end food courts definitely have become go-to places for millenials, sort of a new version of the diner. More on-demand, healthier choices, and more communal, and a more fun place to drink beer than Tom’s Diner. To the extent that these are in rental complexes, or near residential in areas like West Chelsea and Hudson Yards, or Hell’s Kitchen (aka Clinton), these are draws for renters and owners, and therefore add to neighborhood cache (and thereby property values). Add to that Brookfield Place, Eataly, and others that have become major draws in and of themselves.
A super popular tourist spot like Levain? Most people would argue that it’s a net negative to neighborhood vibe. Hopefully, somehow, there are indirectly positive impacts of having a line down your street from morning to afternoon. I’ll take this moment to say that since Magnolia sold out to a private equity shop, the quality has gone downhill. Oh well.
AirBnB? While it isn’t retail, per se, there is no question that it could be the most detrimental player around. In Manhattan, it’s not prevalent enough to make a dent, but in Brooklyn and definitely in other cities, no other new thing has done more to destroy the vibe of a neighborhood. As people move out and turn their condos into AirBnB cash cows, it means that people don’t know each other on their blocks. The free-market person inside of me cringes a little writing about this, but there is a line, and I hope that we as New Yorkers don’t cross it.
Smaller stores, specializing as conduits to online shopping, will certainly continue to catch fire – like Bonobos’ shoop, Warby Parker, and others. But for now, let’s hope that restaurants, blow-out salons (and not nail salons), and other neat retail can fill the gaps left by hardware stores and other retail getting eaten by Amazon.