In order to test out the market in certain areas, a growing number of retailers in Manhattan are opting for short-term leases before making a long-term commitment to a location.
For example, when executives at The RealReal wanted to open a location in SoHo, the secondhand, luxury goods consignment company decided on a short-term lease to make sure the neighborhood was the right match for them.
“Our model is all about testing things, getting smarter, seeing what’s working and not working,” said Rati Levesque, chief merchant at The RealReal, according to The Wall Street Journal. “That’s how we run our website.”
The retailer, which started online seven years ago, opened up a holiday pop-up store in 2016. The location was a success, bringing in new customers while strengthening the company’s overall engagement with its existing customers and consignors. The following year, the company signed a five-year lease for its store at 80 Wooster St.
According to a new report from real estate services firm CBRE Group Inc., there were 53 short-term retail deals in 2017, an increase from the 13 deals in 2016. In the second quarter of 2018, there have been at least 28 short-term deals, with apparel being the most active tenant category on the list.
The report also revealed that many of the short-term deals made from the beginning of 2016 through the second quarter of 2018 took place in SoHo, which had 20 of the 94 short-term deals during that timeframe. In addition, the Plaza District, which includes Fifth Avenue between 49th and 59th Streets, and Upper Madison Avenue recorded nine deals during that same year-and-a-half period.
“The obvious positive on the tenant side is that they can test the market,” said Michael Slattery, CBRE’s manager of research. He added that for landlords, the upswing is that if tenants like the location, they will extend their leases.