Dive Brief:
-
Lululemon Athletica is poised to take over an 8,000-square-foot space on Fifth Avenue in New York City that previously housed a Sephora store that moved down the street in March, sources told Bloomberg.
-
As physical retailers struggle with sales and traffic declines, landlords in New York City (and elsewhere) are working to keep them around by giving merchants cash for improvements and moving expenses, with such enticements especially common in key shopping areas like Madison Avenue and Fifth Avenue.
-
Midtown Manhattan has seen retail vacancies rise in those areas. At Fifth Avenue’s ultra-expensive shopping section, from 49th to 59th streets, rents have fallen 2% this year to an average $3,324 per square foot, according to a report released Monday by the Real Estate Board of New York that was cited by Bloomberg.
Dive Insight:
Lululemon may be able to get a good deal on Sephora's old space, considering that retail rents in the New York City area fell 18% last year compared to 2015, coming down to $2,104 per square foot, according to numbers from commercial real estate services firm Cushman & Wakefield. With Times Square’s third quarter property availability rate increasing 11% year-over-year to 22%, landlords there have been seeking out tenants who can provide “experiential retail." Landlords want them because those businesses tend to generate higher sales than traditional retailers do, according to a report last year from real estate development company Witkoff.
Lululemon fits that bill, boasting well-designed spaces that can accommodate yoga classes and other activities that contribute to a more compelling shopping experience. As suburban stores, malls and their parking lots have proliferated, much of the fun of shopping has been drained, according to retail futurist Doug Stephens, author of "Reengineering Retail: The Future of Selling in a Post-Digital World."
“Unfortunately, as retail scaled through the 70s, 80s and 90s, we lost that experiential nature,” he told Retail Dive last year. “Retail became more about the acquisition of material goods and less about the enjoyment we could have in shopping for them. Stores became concrete boxes, devoid of any beauty or soul. Thankfully, I think we’re heading into a new era where how things are sold will be as important as what is being sold.”
