Rising vacancies are adding up to a new twist on the old retail adage: It's now "relocation, relocation, relocation."
Across Manhattan, companies from nightclubs to hair salons to eateries facing higher rents than they can handle are pulling up stakes and moving to less expensive locations. That's because with the recession, the name of the game now is survival.
Manhattan real estate has always been subject to high-profile musical chairs — think Barneys abandoning Seventh Avenue for Madison, or high-end jewelry purveyor Graff's recent move within the same block of Madison to grab a corner — but the economic meltdown means this migration wave is different. More space is available than during the last several years, providing more options for tenants.
What's more, moving to spaces one-third or one-half the rent can mean the difference between closing and having a shot at weathering the brutal economic downturn.
"People are looking at alternative ways to keep in business, ways to relocate to another part of the city or move within a neighborhood. Any sort of cost-cutting measure helps," said Jason Maurer, associate broker at Newmark Knight Frank, who recently worked on relocation deals for bakeshop Tisserie and coffee shop Miro Café.
Facing an abundance of retail options, New Yorkers typically zero in on a handful of favorite shops and eateries close to work or home, and resist traveling even an extra block outside their chosen zones. Relocating works best when it is close to the original location, or for businesses with established clienteles willing to shift their patterns to a new storefront, brokers said.
Some businesses like the Cutting Room, a nightclub, have more flexibility because its followers are willing to travel to someplace new, the owners said. The Cutting Room shuttered its 10-year-old 19 West 24th Street location last month because the landlord asked for a rent of $35,000 a month, up from $10,000 a month in 1999, according to managing member Steve Walter.
The owners plan to look for new space Downtown and reopen in a few months. They are confident in the celebrity power of co-owner Chris Noth (a star of the hit television series "Sex and the City") and the club's performers to lure customers to a new neighborhood. Walter hopes to reopen by summer and said he doesn't worry about relocating, because "we're a destination location."
Walter is looking in Manhattan and loves Hell's Kitchen, Lincoln Center and the Upper West Side. But he feels that the neighborhood is less important than finding a 6,000-square-foot space with 14-foot ceilings where he can get a liquor license and set up a stage with good sightlines.
For her part, broker Faith Hope Consolo expects to see a revival of an older retail pattern: clustering of similar types of businesses. Fashion is one example — take the recent proliferation of high-end jewelry stores in the mid-60s on Madison Avenue. In the recession, more retailers may seek the benefit of grouping together, the better to reach those rare clients who are still shopping for a particular category of merchandise.
Consolo sees such clustering on Park Avenue and East 58th Street with upscale bedding stores. Luxury French linen maker D.Porthault moved there from East 69th Street in 2007 and sources expect luxury linen maker E. Braun & Co. to join that stretch of Park Avenue soon, too.
"In unity there is strength," said Consolo, who is chairman of the retail leasing and sales division at Prudential Douglas Elliman. "Now it's such a challenging market that in order to embrace change they all have to group together."
When a tenant can't afford a lease renewal, moving nearby helps retain an established customer base. Late last year, Miro Café inked a deal to relocate from its long-term Soho home at 474 Broadway, down to 400 Broadway. The new address is only two digits different, but rental rates are one-third cheaper on the stretch of Broadway south of Canal Street. Miro Café will join Infinity Shoes and David Z, other retailers that recently moved below Canal, extending the fringe of the Broadway Soho shopping strip. Maurer said the new lease, for 1,963 square feet, is in an area where rents are about $100 a foot.
"We shifted a couple of blocks south — down there a lot of stores started on Broadway in Soho and had been displaced by rising rents in the last couple of years," he said.
For Ronald Harrar, owner of pastry shop Tisserie, relocating has allowed him to create savings by taking a smaller space for far less rent than his prior landlord had requested for a lease renewal. Last month, Tisserie left an 1,800-square-foot space at 857 Broadway for 1,400 square feet in the Park Central Hotel at 870 Seventh Avenue. Harrar signed a 12-year lease to avoid the disruption that moving after only four years in a lease assignment deal caused.
Moving from Union Square to 55th Street has interrupted business, but Harrar is happy with his new deal. He said the landlord provided generous free rent time during construction, and is helping promote the pastry shop and new 40-seat bistro, encouraging clients to have pre-theatre dinner at the eatery, renamed Tisserie 55.
"I was lucky enough to find a very good location, with a landlord who makes sure to do everything within his power to help you succeed," said Harrar, who runs the business with his brother Morris.
Lost revenue and higher-than-expected costs are the biggest challenges of relocating. By limiting the downtime between the closing of Joseph Martin Salon at 717 Madison Avenue at 64th Street and his reopening at the Galleria at 115 East 57th Street, off Madison, last month, Joseph Strafaci tried to minimize the hit to revenue.
Strafaci, who calls himself a working owner of the hair salon, said he made the move because his landlord did not want to renew the lease after 25 years. He recommends small business owners considering relocation pay close attention to financing, and don't rely on verbal commitments for money.
"Without money fully committed to, and in your pocket or account, be very careful," Strafaci said.
Source: http://therealdeal.com/newyork/articles/stores-moving-to-stay-in-business
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