FTI Consulting Identifies Changing Face of Retail Real Estate in New York Metro: Shopping Malls Evolve into Community Centers, Focus for Manhattan Retail Shifts

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FTI Consulting, Inc. has noted a transition in the New York City Metro area retail segment that follows the recent revival in consumer spending to pre-recession levels and the anticipated recovery for the retail industry in 2013.

FTI logo as of May 2011
Shopping malls are being repositioned to become more of a daily destination rather than a place where people shop once or twice a week,” said Glenn Brill, managing director, Real Estate Solutions at FTI Consulting.

FTI Consulting, Inc. (NYSE: FCN), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value, has noted a transition in the New York City Metro area retail segment that follows the recent revival in consumer spending to pre-recession levels and the anticipated recovery for the retail industry in 2013.

“Specifically, shopping malls are being repositioned to become more of a daily destination rather than a place where people shop once or twice a week,” said Glenn Brill, managing director, Real Estate Solutions at FTI Consulting. “To that end, we are seeing retailers, such as supermarkets, entering shopping malls as a catalyst for more traffic throughout the day, seven days a week, rather than the Thursday-to-Sunday crowd that is typical of most shopping malls.”

For example, Simon Property Group recently announced plans to tear down sections of the Nanuet Mall and reposition it to offer the kinds of retailers and convenience that the neighboring Palisades Center megamall does not offer, including a high-end grocery store, to be named.

In addition, mini anchors – smaller fashion-focused versions of the major department stores – are leasing space in suburban community centers to offer convenience and accessibility to consumers where they shop more often – and closer to home.

“Hybrid community retail centers are being developed that combine big boxes, mini boxes such as standalone bank branches, and entertainment offerings. This approach helps a retail development connect more readily with a consumer’s lifestyle while reducing travel time and offering a price point that is accessible to the entire community,” said Brill.

At the same time, according to FTI Consulting, more shopping malls are featuring big box outparcels as these retailers try to stand out from the crowd and reach their customers in more convenient ways. But some properties, like American Dream@Meadowlands, while almost a retail category unto itself, rely on the notion that retail centers have to offer an exciting, interactive lifestyle experience, according to FTI Consulting.

Brill, who had consulted for the Mills Corporation when the firm was developing Xanadu, said, “The $1.9 billion megamall recently acquired by Triple Five has the potential to become a ‘suburban Times Square,’ a center of popular culture and a leisure-time destination, if it can succeed in offering popular entertainment brands and a dynamic representation of American culture that targets a young demographic (ages 18 to 34) and young families. The new developer will need to cook up enough excitement to make the project attractive to both tourists and the huge local market and be worthy of return visits by local residents.”

FTI Consulting also addressed some of the shifts occurring in the New York City retail market. According to Jahn Brodwin, senior managing director, Real Estate Solutions at FTI Consulting, “Tourism in New York is hot, and that is helping drive much of the city’s retail success. This especially is evident in the Times Square 'Bow Tie' section of Midtown, which has become a real boon for retail.”

But the Upper East Side -- the 60s and 70s between Lexington and Second avenues -- has quieted considerably for retailers, and rents are at a relative low ebb,” Brodwin said. “National and international retailers still have a presence there, but it’s dominated more by local ‘needs-based’ retailers, restaurants and entertainment venues. The 2nd Avenue subway construction continues to add stress to retailers.

“We are seeing areas such as the Lower East Side and Alphabet City poised to become the next retail hot spots in Manhattan,” added Brodwin, “But it remains to be seen what kind of retailers will make their mark there. Will it be the smaller, local retailers or the national chains and even big box retailers? The neighborhoods do not yet have the density that typically would attract those kinds of retailers, but it’s still a wait-and-see game.”

About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 3,700 employees located in 26 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management and restructuring. The company generated $1.5 billion in revenues during fiscal year 2010. More information can be found at http://www.fticonsulting.com.

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