I’ve been meaning to write this post for about a year, as the beginning of a series but for a variety of reasons, I’m just getting around to it now, my bad.
New York City
I spent the past year living in the Financial District of NYC, close to the World Trade Center site. While that neighborhood has seen rapid residential (and with it, commercial) expansion since 9/11, there are still several vacant storefronts and buildings, as well as a curiously large number of stores that look like leftovers from a scene in “American Psycho” i.e. pre-Guliani NYC. From speaking with real estate ‘folks, I’m told this is due to a variety of factors: long-term leases, on-going (and on-going…) construction on the new Fulton Street Transit Hub, landlords/owners holding-out for prices they’re not likely to see for many, many years, etc. There’s definitely a sense that retailers/restaurants/businesses are waiting for that catalyst or point at which the neighborhood’s development/gentrification reaches ‘critical mass,’ but despite many positive developments, the Fulton/Nassau area still seems freakishly out of place when around the corner on John & Gold streets there’s luxury apartment buildings and semi-bustling restaurants/hotels/retail. Hopefully, once the Frank Gehry-designed Beekman Tower (soon to be the tallest residential building in NYC if I’m not correct), with its 900+ upscale rental apartments is mostly-rented (whenever that may be…), it will hasten the further gentrification of the northern-part of the Financial District.
Since my lease was up a few days ago, I started researching new apartments via Craigslist, Urban Sherpa, and other no-fee sources (I categorically refuse to pay some uninformed schmuck realtor/broker to tell me things I can find out myself, parasitic value-sucks they are). One apartment I found in a semi-recently-converted (from offices to “luxury” apartments) in the middle of the Financial District that looked promising and had everything I was looking for, however, when I inquired whether the price was negotiable (as I’m of the school of thought that EVERYTHING, one way or another, is), I received a terse and frankly rude “ABSOLUTELY NOT!” In response, I dug up some research on unemployment, vacancies, etc and sent them over to the broker to support my views that rent prices will decrease (or are currently too-high), and at-best stay flat in the near-to-intermediate term. His response was to accuse me of data mining, and further continued “maybe the economy will get worse, but maybe it will also get better, who are you to say?…)
I would have asked him to respond in kind with data supporting his claims but I’m not that much of a masochist; close, but not quite. I’m hardly surprised by real estate “professionals'” cognitive dissonance, but I am a bit surprised that they weren’t willing to even consider any price (etc) concession/compromise. Group-think is alive and well in the residential rental real estate market in downtown Manhattan.
Shocking, I know…
Since my roomate and both agreed we didn’t want to re-new our lease, I moved back to Northern NJ until I find a new apartment/roomate(s), but considering the above, I’m not in much of a rush. I expect prices 3-6 months from now will be no-higher than they are now, and since new-leases traditionally aren’t signed during winter, I may have some more (any) room to negotiate.
Scanning the shopping centers and malls in and around North NJ (Passaic, Essex, Morris, Bergen, etc counties), there is still plenty of empty space. First and foremost lets discuss the aesthetically offensive debacle known as Meadowlands Xanadu (now, apparently just The Meadowlands), originally scheduled to open in 11/2008. Two years later, the owners/sponsors are still apparently asking ludicrous lease rates, yet the project is still empty. Pretty sure its also still incomplete with the remaining work lacking any semblance of financing. As of mid-May, 2008, ~50% of the space was leased (executed), however subsequently some tenants like Cabellas have pulled-out. I have been unable to get any sufficiently detailed reports on the current status of the project beyond this.
Curiously, there is a new (construction began maybe 24 months ago +/-), semi-upscale shopping center a few miles past Giants Stadium on Rt 3 Westbound called The Promenade Shops at Clifton that seems to be slowly but semi-steadily attracting tenants. We’ll see how many are still there in a year or two. For what it’s worth, I’m told (not sure about timing) that the large Hoffman-La Roche HQ and plant across the highway will be closing soon, leaving the immediate area with ~3,200 fewer employees.
Further west at a closed Circuit City on Route 46 Westbound, P.C. Richard is taking over the stand-alone space (after being empty since the firm went bankrupt), presumably moving into a bigger space than their current location only a few hundred feet down the highway. Electronics Expo just moved into the former space occupied by Fountains of Wayne (made semi-famous by the band of the same name), despite having an existing location about a mile away adjacent to Willowbrook Mall (which itself has definitely seen better, brighter days). Keep in mind, there is a VERY popular Best Buy less than 2 miles closer to NYC on the same highway, i.e. coming from NYC, customers first encounter the alread-more-popular Best Buy before they even get to P.C. Richard and Electronics Expo. There’s also a Sixth Avenue Electronics between the Best Buy and the new P.C. Richard and Electronics Expo locations.
I wonder how many customers get past the first two without making a purchase, perhaps only the most price-sensitive of consumers? Also: could there be more big-box electronics retailers in a smaller suburban area? Surely the cut-throat competition will put no pressure on margins whatsoever ($100 says at least 1 store will be closed within 24 months). There’s also a large space in the shopping center right before the new P.C. Richards, left vacant by Linens ‘n Things since their bankruptcy/reorganization, and basically nothing but tears & memories of overpriced wedding gifts where there was once a Fortunoff near the Willowbrook Mall. There is, however, a small-ish space in a shopping center on rt 46 that appears to be a relation operation, Fortunoff Outdoor in the space formerly and mysteriously occupied until about a year ago by CD/music retailer Coconuts (how Coconuts lasted so long is completely beyond me).
On my way out to play golf out at Crystal Springs Resort (pretty sweet place; bit of a hike from NYC but worth a go) the other weekend, I passed yet another new electronics retailer on Rt 23 North (about 5 miles north of P.C. Richard) that goes by a name I’ve never seen before and that I can’t recall at the moment. This store is in a small strip-mall along with a Dunkin Donuts, Motorcycle/atv dealer, and I believe a Pool supply store, and appears to have opened within the past 2-3 months. I give it another 9-12 months, tops, before it closes. Did I mention there’s also another BRAND NEW Best Buy (in the space left vacant for about a year by the bankrupt Linens ‘n Things) a few miles north of this small, nameless electronics retailer? Yup, ’tis there. Oh, and there’s also a Wal-Mart and a Target about half a mile north of the new Best Buy (not to mention a Home Depot and a Lowes separated by maybe a 1/4 mile of highway).
On the same stretch of highway there’s both a Chilis and Applebees, both of which have been mired in somewhat questionable and likely self-defeating promotional battles for the past few years. I’ve stopped at both a few times over the past couple of years, and they don’t seem as busy as they once were, but that’s from a tiny sample/# of observations so its hard to draw any legitimate conclusions here.
What’s the take-away from all of this? Frankly, I think from these observations, we’re seeing mixed signals about the economy and its future prospects. Over the past 5-10 years I’ve noticed a serious surge in big-box retailers spreading outwards to further and further suburban areas. Highway traffic has increased significantly (between the new-ish retail and the poorly-designed traffic control methods put in place to accommodate them) and turnover at smaller shopping centers appears to be up, as do vacancies. I’d like to see same-store sales for the past few years for the stores that’ve lead this suburban sprawl, but if I had to guess, I’d imagine they peaked and dropped along with the broader economy as a whole, which makes me wonder if perhaps big box retailers/national restaurant chains expanded too quickly and are loathe to shutter under-performing stores or recognize their folly.
If you have some of your own economic anecdotes please leave them in the comments. Thanks!