Empty stores and pop-up ones constitute the current stage of the main commercial areas from fashion capitals such as New York, Los Angeles, Chicago or Miami.
Retail Apocalypse hits Fifth Avenue squarely. Prime axes have not escaped either the reordering of the retail sector in the United States, which until now had focused closures in shopping centres. The law of supply and demand has agitated the rents in the most expensive streets of the country in which to rent a store with double-digit drops during last year.
The star section of Fifth Avenue, between 49 and 60 streets, has lost this year the leadership as the most expensive one for retail, according to the last Main Streets Across the World 2018, published by the real estate consultant Cushman&Wakefield. Hong Kong’s Causeway Bay has taken away its first position, despite also reducing the price of its stores in a 4.1% last year.
According to the report, the average price per square metre and year in the most popular street in New York has collapsed a 26.6% in 2018, going from 28,262 euros in 2017 to 20,733 euros. But it is not the only case in the United States. San Francisco’s golden mile, Union Square, has cheapened its commercial rents in the last year a 17.3%; in Chicago, North Michigan Avenue, reduced prices a 20%.
In Miami, its top commercial axis, Lincoln Road, has also reduced the average prices of rents an 18.5% whereas in Washington DC, in the commercial area of Penn Quarter, prices have dropped a 15.5%. In Rodeo Drive, Los Angeles, the decrease has been more moderate, of only a 2.2%.
The report highlights that commerce in the United States is taking the lead of innovation, and that companies such as Amazon or Nike are leading the transformation of physical stores with their new concepts Amazon Go or Nike Live. According to Cushman&Wakefield, what those brands are doing today will be retail commerce’s standard in future years.
Nevertheless, new concepts of store are just the tip of the iceberg of a transformation much deeper that has to do with the shift in consumption habits. In the United States, this change evidenced an oversaturation of commercial surface per inhabitant during a time in which the country’s traffic in commercial areas was reduced.
The law of supply and demand is affecting the city’s prime axes
This trend started in some shopping centres and department stores, but it has also reached the prime axes of the country’s great capitals. However, there are two more factors influencing this result, as claimed by Sever Gardcía, founder of SGN Group, with headquarters in New York. These are: the fall of tourism due to the impact of currencies and the interests of commercial facilities’ owners.
Regarding tourism, García sustains that, even though New York is still one of the world’s touristic enclaves, the strength of the dollar has impacted the budget of visitors coming from countries like the United Kingdom or Russia, whose currencies have devaluated.
As per real state interests, store owners have occasionally preferred to keep the spaces empty instead of occupying them below certain levels so as to avoid entering a lowering spiral. Because of that, many of these owners are opting to rent them to pop-up stores, as even if the price of rent is lower, at least they will be temporary, and it will not have a direct impact in the real estate market.