Situs Newswatch 11/21

Christmas Retail Shopping Blues 

Just in time for this Friday, -‘Black Friday’- and the start of the all-important Christmas shopping season, some of the world’s hottest shopping districts, are losing key retailers.

Popular shopping real estate locales, from New York City’s Fifth Avenue to Hong Kong’s Causeway Bay shopping districts, saw rents fall this year, according to a new report by Cushman & Wakefield, as retailers have finally started to balk at high rents.

Ken Riggs, President of Situs RERC says, “Location, location, location…but at such a cost!  Clearly, tenants have gone past the brink of what they will agree for in retail rents – even with the glittering marquee of Fifth Avenue and plenty of shoppers with fat wallets.  Shoppers still want the luxury brands found on high streets, but they may be pulling their money from the sticks and bricks and pumping it into internet purchases instead.”

For the first time since the financial crisis, rent fell on Upper Fifth Avenue — the most expensive retail property in the world — from $3,500 per square foot in 2015 to $3,000 this year. Vacancy rates, meanwhile, jumped to 15.9 percent from 10 percent a year earlier.

Situs’ Riggs adds, “In NYC, we see the retail real estate industry continuing to pressure retail merchandisers or tenants to pay staggering rents. But foot traffic in stores has declined dramatically, even for high-end brands with flagship stores on Fifth Avenue. We have hit a breaking point where even world-class retailers are saying they cannot generate the sales volume to make it pencil out at the current asking rent levels.”

Retailers can shave thousands of dollars per square foot from rent simply by relocating to nearby areas — Cushman & Wakefield refers to these as “cool streets” rather than “high streets.” For retailers in New York, that means lower Manhattan and Brooklyn may be smarter locations.

“Investors need to take out some of the frills to get the marriage to work,” warns Riggs.

Mind the Gap

Gap is shutting more stores than forecast previously as it expects a further drop in traffic during the crucial holiday shopping season.

“Given that challenging traffic trends have continued, we are investing meaningfully in marketing across our portfolio brands during the holiday season,” outgoing Chief Financial Officer Sabrina Simmons said on an earnings call.

Gap said it now expected to shut about 65 company-operated stores this year, compared with its previous forecast of about 50 stores.

Traditional apparel chains are struggling with the growing popularity of online retailers and fast-fashion chains such as H&M which are known for offering trendier clothes at cheaper prices.

Gap reported its seventh straight quarterly sales decline in the three months ended Oct. 29 as demand for its Gap and Banana Republic brands remained sluggish.

Amazon.com’s Marketplace Concept Spreads to Other Retailers

Crate & Barrel, taking a page from Amazon.com Inc., is partnering with outside sellers to boost the number of items available to shoppers on its website.

The home-goods chain this week is adding items to its online assortment, such as kitchen tools and other small appliances, that it won’t handle or ship. Wal-Mart Stores Inc. and Macy’s Inc. are among the other retailers that have opened their e-commerce sites to third parties as a way to expand their reach with consumers.

On Amazon, an early adopter of the concept, half of the items are sold by third-party sellers. “The benefit to the consumer is huge, because now we have a much wider assortment and more options,” said Michael Relich, Crate & Barrel’s chief operating officer.

With the marketplace model, retailers can increase the number of items they offer, giving them a bigger presence in a field crowded with e-commerce offerings, without forking over cash for inventory. But it also runs the risk of damaging the retailer’s brand if there are any problems with an order from an outside seller.

The marketplace model underscores the challenge for traditional retailers competing with Amazon, eBay Inc. and other online-only sites that now offer millions of items for sale—much of which they don’t actually hold themselves. Amazon has become a one-stop shop in part by using third-party sellers to increase its offer to hundreds of millions of items for sale.

read more: Wall St Journal

Brexit No Barrier for China’s New Financial District Plan in London

With Britain trying to hammer out the terms of its exit from the European Union and banks considering their options on the continent, is this the best time to start building a new financial district in London?

China thinks so.

Four of the country’s biggest banks this month agreed to finance the first stage of a 1.7 billion-pound ($2.12 billion) transformation of an old East End dock into a hub for Asian businesses. To the west of the site near London City Airport, the towers of Canary Wharf stand as a reminder of how ambitious projects in the U.K. capital can remain white elephants for years before turning into cash cows.

Chinese companies are on track to invest 4 billion pounds in London property this year, beating the 2015 record by a third, according to data compiled by CBRE Group Inc. Though the U.K.’s vote to leave the European Union lowered prices for Chinese by depressing the pound against the yuan, any longer-term payoff depends partly on whether Brexit will drive down rents and values by diminishing the city’s role as Europe’s finance hub.

“Chinese investors are betting that the U.K. will do well in the Brexit talks, and if it doesn’t, companies will still choose London as their base,” said Michael Marx, former chief executive officer of developer U+I Group Plc. “London didn’t become the financial capital of the world overnight and it certainly won’t lose that status so quickly.”

Developer ABP London and investment company Citic Group Corp. are hoping that lower rents along with the pound’s drop will attract expanding companies from China and other parts of Asia to their new hub. The rise in London investment coincides with a Chinese binge on foreign properties, driven by high prices and dwindling commercial property investment opportunities at home.

read more: Bloomberg

Trump University Law Suit Settlement

President-elect Donald Trump on Saturday defended his decision to settle lawsuits over his Trump University real estate seminars for $25 million, saying he does not have time to fight the fraud cases in court now that he is headed to the White House.

The lawsuits cast a shadow over the Republican’s presidential campaign and led to one of the more controversial moments of his run for the White House when he claimed the judge overseeing two of the cases was biased because he was of Mexican ancestry.

While denying any wrongdoing, Trump agreed on Friday to pay $25 million to settle the lawsuits. “I settled the Trump University lawsuit for a small fraction of the potential award because as President I have to focus on our country,” Trump wrote on Twitter on Saturday morning.

New York Attorney General Eric Schneiderman has said over 5,000 students across the country were defrauded out of about $40 million, so Trump’s settlement of $25 million was around 60 percent of these estimated damages.

“The ONLY bad thing about winning the Presidency is that I did not have the time to go through a long but winning trial on Trump U. Too bad!” He said in a second tweet.

In announcing the settlement, Schneiderman said the deal followed repeated refusals by Trump “to settle for even modest amounts of compensation for the victims of his phony university.”

In a statement, Schneiderman called the settlement a “stunning reversal by Donald Trump and a major victory for the over 6,000 victims of his fraudulent university.”

Real Estate Planning: Divorce in U.S. Plunges to 35-Year Low

The U.S. divorce rate has fallen for the third consecutive year, to its lowest level in more than 35 years.

Meanwhile, marriage is up a bit, at 32.3 marriages for every 1,000 unmarried women age 15 or older last year, from 31.9 in 2014. It was the highest since 2009, suggesting that, after a plunge of several decades, matrimony could be stabilizing.

“The decline has stopped,” said Wendy Manning, co-director of the National Center for Family & Marriage Research at Bowling Green State University.

Every year, the center uses census data to calculate the previous year’s marriage and divorce trends. This year’s calculations show that divorce has been dropping quickly, to a rate of 16.9, down from 17.6 in 2014 and a peak of almost 23 in 1980.

read more: Bloomberg

Check Out My Blouse –  Rented at Neiman Marcus

Neiman Marcus could sell you a Halston Heritage party dress for the holidays for hundreds of dollars. Or it will help you rent one for $70.

In a strategy that sounds counterintuitive but is a push to bring in younger shoppers, Neiman Marcus has invited the rent-a-dress company Rent the Runway to open locations within its stores. The first is set to open Friday in San Francisco.

Several more Rent the Runway locations will open around the country in urban and suburban Neiman Marcus stores next year, executives say. It is a surprising shift for a store chain that is known for dressing wealthy ladies who lunch. But Neiman Marcus hopes that Rent the Runway, which is popular among 20-something shoppers, will serve as bait for a generation that hasn’t taken to department-store shopping the way their moms did.

read more: Wall Street Journal

Have a productive week, a great Thanksgiving and may Santa be good to you!

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