by DAVID ROSEN
I met a friend for lunch. “I’m in the Occulus” “Occulus?” “Now I’m by Occupy” “Occupy?” “Broadway and Liberty” “That’s where I am” “West Side” “I am” “No your not” “I see you”
Upon meeting, my friend and I walk back into the Occulus, also known as the $4B train station built after it was destroyed in 9/11, We are in lower Manhattan, and we leave our meeting spot, adjacent Zucotti Park and his office, to walk over to the amazing Brookfield Place.
At Brookfield, perhaps one of the most successful commercial projects of all time, we peruse the dining options at Le District. Le District is a multiple floor dining extravaganza featuring a supermarket, and many niche eateries, all of which are packed.
Outside there are multi-million dollar yachts. The prices inside aren’t cheap either. We spend almost $50 on lunch. Might have got away with $40 if we hadn’t got the burrata at Tartinery. But the burrata was phenomenal. No regrets.
Afterwards, walking back through the newly opened Occulus mall, I can see that stores like Rolex are coming soon. The train station commercial space reminds me of Les Halles in Paris, a sweeping commercial project the likes of which had never existed before in lower Manhattan
This is the pinnacle of the commercial retail market. Incredible public support has been given. There are world class retailers. Eating is sophisticated, shopping is Saks, watches are Omega and Rolex. The Goldman Sachs world headquarters and Conde Nast are among the locals. You get it. However, between the two adjacent malls, there is still quite a bit of commercial vacancy. In the past, with projects of this size, retailers would lease the properties before they were finished.
Some time ago, amidst many other accurate predictions I made, I said the commercial real estate market would crash.
The point of this story is to reiterate those findings and to continue observing how urban housing is being dramatically altered by technology.
In a world where, if you go to Staples or Home Depot in Manhattan, and they tell you most of their offerings are not ‘in-store’ but online, how are consumers being reprogrammed? In a world where corporations are having more and more employees work from home, how do we value commute times? And even in residential, in a city where people don’t cook much and deliver more, how do we value kitchens?
Commercial real estate isn’t dead, but it isn’t going to play by the same rules going forward. Whereas in the past, a storefront was a place for business. Now it’s a marketing tool to drive sales from other channels or it’s an online delivery hub. More competition to create ‘destination locations,’ but with less opportunity to capitalize on point of sale.
It used to be a given that a Times Sq address or a SoHo boutique was a loss leader and a status symbol. Throughout America, today, it seems that in sectors like banking and retail that is more and more true of any location, everywhere. The branches and stores create awareness and a sense of convenience, but not profits necessarily.
The restaurants we dined at might have been expensive, but I doubt they were profitable given what I imagine the rents are. I could be wrong. Either way I expect commercial rents to go down continuously for the next 10 years.