• Wall Street Journal

Pop-Ups, the New Darling of Retail

Manhattan’s softening retail market is making allies of the pop-up and the landlord.

Retailers are getting to test the waters in the priciest shopping districts with pop-ups, often at discounted rents. And landlords are using the temporary stores to show off the space to prospective long-term tenants, say brokers and retailers.

“This kind of phenomenon only comes when there is a considerable amount of availability,” said Joanne Podell, a vice chairman at real estate services firm Cushman & Wakefield. “Now, there’s a proliferation of them.”

Today, retailers with brick-and-mortar operations are more cautious, wanting shorter leases and hesitating to add stores because of the rapid growth of online shopping, saidGreg Portell, lead partner in consulting firm A.T. Kearney’s retail practice.

In the third quarter, for example, availability increased in nine of the 11 Manhattan retail submarkets tracked by Cushman & Wakefield, compared with the same period a year ago.

The highest rates of availability, which includes vacant space and space that will be vacant, were 29.3% for lower Fifth Avenue between 42nd and 49th streets and 23.4% for the Meatpacking District. Average asking rents fell from 18.1% to 2.3% in all the shopping districts except for lower Manhattan.

Pop-ups, Mr. Portell said, “are able to meet consumers where the consumers are going to go.”

Stantt, which makes men’s shirts to order in 75 sizes, opened a pop-up shop in Chelsea Market several months after it launched online in January 2015. After discovering its core customer is in Midtown, the company has a pop-up store at 501 Lexington Ave. until the end of December.

“The overhead and financial commitment to open a store in Manhattan was too much for a startup,” said Matt Hornbuckle, Stantt’s chief executive and co-founder. “And we didn’t want to commit to something that was a hypothesis before we tested it out.”

Even with online and mobile shopping, most retailers consider it essential to have some kind of brick-and-mortar operation. In September, sisters Neely and Chloe Burchlaunched Neely & Chloe, a handbag, footwear and accessories brand. They opened both online and in a 750-square-foot space at 373 Bleecker St. with a five-month lease, said Neely Burch.

Fashion brand Everlane, which describes itself as “digital first,” opened a pop-up in SoHo in the spring; another opened in the neighborhood in September. The company has a pop-up at 392 Bleecker St. until January.

“Not only is the retail real-estate market down, but we are finding that as more landlords understand the concept of temporary shops, they are becoming more comfortable with shorter-term leases,” founder and chief executive Michael Preysman said in an email.

Related Cos. has used pop-up shops at its multistory shopping center at the Time Warner Center at Columbus Circle to give a fresh feel and add variety—not to fill vacancies in between long-term tenants, said Kenneth Himmel, chief executive of Related Urban, the mixed-use division of Related Cos.

A pop-up gives “energy” to a space, said Chase Welles, executive vice president at real-estate-services firm SCG Retail. “It’s easier to sell it when something is going on in there as opposed to just a demolished shell.”

Rudin Management Co. just signed on Swedish outdoor gear retailer Fjällräven USA for a pop-up at 3 Times Square through the end of the year, said Chief Executive Bill Rudin.Fjällräven USA will “enliven the corner and create activity” while Rudin explores reconfiguring space on the ground and second floors for a long-term tenant, Mr. Rudin said.

For Patrick A. Smith, a vice chairman in JLL’s retail brokerage, it is all about what a pop-up will do with the space—not about how much it will pay in rent.

“I am much more interested in someone doing an art exhibition or unveiling a new product or something that is Instagram worthy, Mr. Smith said.

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