On the Rebound

The country as a whole has weathered some difficult economic times in the past several years, with the Northeast among the hardest-hit regions. The Northeast retail real estate market felt the impact of both fewer shoppers as consumers moved to areas of the country with better job opportunities, and reductions in the size and frequency of shopping trips.



However, just as the economic prospects of the country have started improving of late, so too have the economic prospects of the Northeast started improving, with the regional real estate market benefiting.



Things still are not as robust for shopping center developers, owners and brokers in the Northeast as they were before the economic crash of the late 2000s. But as demonstrated by the experiences of the following seven movers and shakers in the Northeast market, the region is on the rebound.

New York state of mind

New York has always played a pivotal role in American business, with a level of activity and influence that extends beyond its already impressive size. This holds true when you look at New York’s unique position within the Northeast retail real estate market.



“I view the Northeast retail real estate market as a tale of two worlds,” said Andy Graiser, co-president of commercial real estate management firm A&G Realty Partners, “New York City and its boroughs, and everywhere else.”



In terms of Manhattan and surrounding boroughs, Graiser said rents are increasing and new retail markets are being developed.



“There is no better example than downtown Manhattan with the World Trade Center and Brookfield,” Graiser said. “With the opening of the 9/11 Memorial, tourism and new development have exploded.”



Graiser also cited Harlem, 34th Street, Staten Island and Brooklyn as other hot-beds for retail real estate in metropolitan New York, with expectations for continuing expansion of restaurants, entertainment, and domestic and international retail.



As for the rest of the Northeast, Graiser said there will be continued consolidation from the specialty retail sector, while growth will continue in the luxury end, supermarket (especially organics) and a demand from small shops to be near them. Redevelopment will continue with a focus on more restaurants and entertainment.



“We will continue to see more outlet growth. However, I am concerned about some retailers going too fast into too many outlets and paying the big rents,” commented Graiser. “The continued impact of omnichannel is not eliminating brick-and-mortar but is generally requiring a reduction in the store footprint and number of stores in the respective markets to operate successfully in the Northeast.”

Supply and demand

The economic fortunes of the Northeast have been on the wane for a while, with business and monetary activity shifting to the southern and western parts of the nation. However, according to Corey Bialow, CEO of full-service real estate consulting firm Bialow Real Estate, the Northeast retail market as a whole has rebounded tremendously since the recession, especially within the top trade areas.



“We are seeing rents that have surpassed the pre-recession thresholds primarily within the major regional hubs along the entire I-95 corridor from Washington, D.C., to Boston,” said Bialow. “The inherent problem is that within most of the Northeast region there is very little new product that has been developed within the past few years, so the demand has clearly outpaced the supply. There are several barriers to entry for developers looking within these mature markets as land costs are at all-time highs and the permitting and entitlement process is extremely tedious. As a result the bulk of leasing activity is taking place within second-generation space.”



Looking toward 2015, Bialow expects the Northeast market to continue to see a decline in vacancy rates, especially within prime regional markets. As online retailing continues to dampen same-store sales for hard-goods retailers, “One area we’ll continue to see less activity in will be within the big-box sector, as most of the category killers are continuing to downsize their footprints,” said Bialow. “The strongest sector will continue to be the quick-service and fast-casual restaurants that are aggressively expanding within the entire Northeast region.”



Bialow added that he believes prime urban markets will also continue to see strong interest in the region, with fourth-quarter sales ultimately determining a lot of the direction.

Recovery mode

The Northeast retail estate market may not have fully recovered from the economic recession of the last several years, but Jeff Linton, senior VP corporate communications and community relations for real estate development and management company Forest City Enterprises Inc., says things are moving in the right direction.



“We have a broad range of retail types in our Northeast portfolio, and there has been a steady pickup in the last couple of years,” said Linton. “I hesitate to call it a resurgence, but there is steady growth.”



Forest City has a total of 21 retail properties in the Northeast, including 19 specialty centers totaling 4 million-sq.-ft. of gross leasable area (GLA) and two regional malls with 1.7 million-sq.-ft. of GLA. The company’s Northeast holdings include properties in metropolitan New York and Buffalo, as well as in New Jersey and Pennsylvania.



In the past 12 months, Forest City’s major retail real estate activity in the Northeast has been leasing up its Westchester’s Ridge Hill property in Yonkers, New York. The 1.3 million-sq.-ft. mixed-use property includes residential and office as well as retail space. Anchor tenants include Lord & Taylor, Showcase Cinema De Lux, Dick’s Sporting Goods, LEGOLAND Discovery Center and Whole Foods Market.



“We started the Westchester’s Ridge Hill project before the economy went bad in 2008-2009,” explained Linton. “There has been a concerted effort to lease the property, and it’s now close to 80% leased with more than 60 retail tenants. It’s in a great market north of New York City, and the center is gaining momentum and acceptance in the marketplace. It’s one of only eight centers nationwide, and the only one on the East Coast, to be selected to host The North Pole Adventure, the DreamWorks DreamPlace interactive holiday experience.”

Following the crowd

Some people complain the Northeast is too crowded, but the region’s large number of people per square mile is a drawing card for retailers.



“There has been a noticeable resurgence in the Northeast as retailers and restaurants express their desire to be in densely populated markets,” said Jim Davis, senior VP leasing for commercial real estate development and management firm Olshan Properties. “During the past several years, we have repurposed and redeveloped more than 275,000 sq. ft. of existing space throughout our Northeast portfolio, bringing in a wide variety of great retailers to our properties.”



In the past 12 months, that portfolio has included New York-based centers, such as Parkchester in the Bronx, The Gate at Manhasset in Manhasset, and Great South Bay in West Babylon. In total, Olshan Properties controls more than 3.4 million sq. ft. of GLA in the Northeast, including seven centers in New York, one in New Jersey and four in Pennsylvania. Davis cited Parkchester as a prime example of what is happening