Hard times for retailers should bring more deals for commercial real estate brokers. In Westchester County, where shoppers”™ habits are not centered on malls and big-box stores, downtown retail districts and owner-operated stores could better weather those hard times.
Those were some of the views shared recently by a panel of retail-sector brokers and investors presented by the Commercial Investment Division of the Westchester County Board of Realtors. The panel”™s topic suggested the gloom and fatalism that has set in among retailers in the recession: “Who”™s Next?”
Jonathan H. Gordon, president of Admiral Real Estate Services Corp. in Bronxville, predicted a “lot more vacancy coming on” in Westchester”™s retail market. “It”™s going to be a long, tough haul,” he said. For brokers negotiating leases, “It”™s going to come down to showing retailers mathematically why they”™ve got to be there.”
Gordon said multigenerational retail owners have been “ahead of the curve” in adapting to the recession”™s new math by lowering asking rents to fill space. Slower to react to rising vacancies, institutional investors now “are taking their heads out of the sand and seeing we”™ve got to lower the rent a bit.”
At a Mount Kisco retail property, the owner has lowered the asking rent from $45 to $39 per square foot, Gordon noted. “I think that”™s a realistic number in this new market,” he said.
Stephen Oder, CEO of NAI Friedland Realty Inc. in Yonkers, said vacancy rates in Westchester have been heavily skewed by big-box retailers, such as Circuit City and Home Depot, leaving the market and inflating the county”™s retail inventory. He said 95 percent of national retailers are “sitting on the sidelines.” Oder doesn”™t expect them to return to the market until 2011.
Their absence gives strong local retailers a chance to fill space not previously available to them and get credit from landlords who before wouldn”™t accept them, Oder said.
“We are seeing in the past two weeks alone some significant price drops” in both rents and sales of retail buildings, he said. “It”™s a time now where landlords have to say, do you want to be full or do you want to be empty? You do what you have to do.”
Consumers after 9/11 spent “exuberantly,” Gordon said. Since that collective spending spree has stopped, “We may be a little bit overbuilt right now.” The retail sector “is in flux because there”™s too much retail” in the county, he said.
Oder, though, said he still believes Westchester can handle another 3 million square feet of retail space. He said he expects 1.5 million to 2 million square feet to be developed within 10 years “once the market comes back.”
Rather than overbuilt in retail space, Westchester is “Balkanized” into regional shopping locations and “mini-markets,” said Paul Adler, senior managing executive director of Prudential Rand Commercial Services in White Plains. “The retail economy is a function of where,” he said.
When taking the pulse of Westchester”™s retail market, “You have to break the economy down not only by county but by region within that county,” Adler said. “I don”™t see Westchester experiencing a heavy hit on retail at this time. The general meat-and-potatoes sector of this retail market is good.”
Adler said some large retail developments and “big-picture projects” might be scaled back as big-box retailers rethink their business models. “I”™m not certain that even if it were a good economy, some of those projects were well thought out,” he said. “We”™re starting to see in Westchester maybe a rethinking of some of those mega-shopping center locations” such as Ridge Hill Village under construction in Yonkers and downtown redevelopment projects in Yonkers and New Rochelle.
The real meat-and-potatoes sector ”“ supermarkets ”“ “are now making more money than ever,” Oder said. Food-related supermarket centers with adequate parking will perform in hard times, he said.
Stanley M. Stern, of Mosbacher Properties Group L.L.C. in New York, said retailers in village shopping districts will do better in the recession if merchants join together in associations and business improvement districts to offer special services to customers. But mixed-use development, or high-density “villages” oriented around mass transit, “is the only way to go in the big picture,” he said.
Gordon said village shopping districts such as in Bronxville attract people who go there “recreationally and make an afternoon of it. That whole recreational aspect may help downtowns weather the storm.”
Gordon said owner-operated stores should fare better, as that retail model is “a kind of comfort food right now” for anxious consumers.
Adler saw opportunity for brokers in retailers”™ economic plight. There are deals to be made when stores close or downsize and retail tenants need representation, he said.
 “Those declines always mean for us transactions,” he said. “Someone”™s moving in, someone”™s moving out. We think it”™s a great time for transactions ”“ and we”™re all about transactions.”                 Â
