Real Estate

High End Bricks and Mortar Retail: Last Man Standing

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All the signs are there in luxury retail trends. Soaring urban real estate costs. Inevitable lifting of rent controls, most recently in Spain. Struggling popular priced malls. Lower middle class and middle class incomes strapped by stagnating wage growth. And add to this the rapid acceleration of online shopping.  In the developed world malls and mom and pop retailers are going away, the pace picking up steam.

What will replace them? For starters, in the short term, more ubiquitous and ever larger emporiums of global luxury brands and shopping centers geared to the affluent and elite affluent. Every summer when I go to Madrid I see it happening – independent fashion boutiques replaced by the names you know. In Miami, it’s starkly apparent. With Brickell’s CitiCentre project by Swire Properties, Miami-Dade County will have four high end shopping destinations – Bal Harbour Shops, Village of Merrick Park, and the Design District. During Art Basel I paid a visit to the new section of the Design District and frankly couldn’t believe my eyes – I thought I was transported to Beijing and the shopping center adjacent to the Opposite Hotel (operated by Swire Hotels).

I wrote “the short term” because I think that longer term, the affluent will be looking for more alternatives to the same global designer fare you find in Paris, London, New York or Shanghai. LVMH, Hermes and others have recognized this, and for awhile a few years back there was talk about going global and thinking local, as in designing products that were more of the place. I think they were on to something big, but there hasn’t been much talk of that recently. Absent this, and there will come a time when the affluent will look elsewhere, which they’re already doing online.

At the same time, the cost of marketing for small, independent retailers used to make business challenging, but now, with social media, promotion for a small budget is in the cards. And how about rents? I predict independent high end retailers will thrive despite the rents, considering the kind of profit margins they enjoy.

But there’s a lesson here too for smart real estate developers. My advice? To sprinkle their shopping centers with unique shops at mid-high price points to not only provide variety, but also, draw in the lesser affluent who can make one time luxury purchases and patronize the restaurants and bars. I read that CitiCentre plans to do this very thing. The shopping part of the project is run by the owners of Bal Harbour Shops. It will be very interesting to see what they do. Stay tuned.

 

 

 

 

Baby Boomers and Retirement Niches

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Arguably the most well traveled generation in American history, Baby Boomers, used to the new and different weren’t content with the same old, same old. They helped propel the niche economy, facilitated by technology. We’ve seen everything from special interest cruises and tours to dating sites and ever more niche culinary sensations which we’ve written about over the years. It’s no surprise, then, that in their retirement, boomers are looking for senior-oriented communities to pursue their special interests with the like minded and to be more active in body, mind and soul. And their numbers and healthy assets are propelling a growth in this newest niche.

True, some sports oriented communities like golf and polo have been around for decades. The differences now are that interests are a function of everything from sexual orientation to a wide range of passions and hobbies. Think LGBT focused communities and university based enclaves where residents take classes and have access to skilled nursing care. Others are devoted to the arts such as the NoHo Senior artists Colony apartments in North Hollywood, California with classes in collage construction, creative dance and screenwriting. Probably one of the most unusual is Escapees Care Center in Livingston, Texas, for those with an interest in recreational vehicles and onsite medical treatment.

But don’t think these come cheap. At one multi generational community called NewBridge on the Charles entrance fee for independent living apartments range from $600,000 to $1.3 million besides monthly expenses. The fee is 90 percent refundable but it’s still a major outlay and isn’t risk free.

With the market potential in numbers and price tag, it’s a sure bet to conclude these kind of communities will grow. What’s the next niche?

In an article in the New York Times, Max Greenberg, a senior living adviser and senior real estate specialist in Palo Alto, California predicts we’ll see ones run by large national fraternities and sororities “allowing seniors to once again experience the partying, socialization and spirit of frat life they had in collage. I wouldn’t be surprised to see a Grateful Dead oriented community sprout up in the Bay Area, “he concluded.

Miami and the US Global Financial Triumverate

Brickell City Center

Brickell City Center

If you haven’t been to Miami in a year or more you won’t recognize it. The only other place that comes to mind with so many construction cranes is Shanghai where they call the crane the national bird.  Miami is a city of cities – Downtown, Aventura, Miami Beach, Design District, Coconut Grove, Wynwood,  and more. And many of them are enjoying the  boom that’s not just residential, but commercial construction.

Probably most impressive is the $1.05 billion mixed use development project of Swire Properties called Brickell City Center pictured here that seems to shoot up from one day to another, much like a teenager in growth spurt. Will this be another one of Miami’s boom and then bust cycles? The circumstances are different this time. As a Harvard educated, long time resident mover and shaker said to me,  Miami will be one of the three US global financial centers in the future. It’s Miami for Latin America and the Southeast US; New York for the East Coast and Europe; and Los Angeles for Asia and the Pacific Basin.

Miami is just growing into its new role. It will be a place on the marquis of global luxury brands – New York, London, Shanghai, Miami, etc, a place they need to be. We’re already seeing it. High end shopping centers including Bal Harbour Shops and Aventura Mall have major expansion plans, joining an expansion in the Design District and the new offering in Brickell City Center. Luxury hotel brands are all moving in or adding properties (a second Four Seasons and second SLS Hotel), refurbishings of Art Deco properties in particular happening at a quickening pace. Is there still room for more hotels beyond what is projected? I can’t call that one. But what is for sure is that any major player in travel and luxury lifestyle needs to give Miami a serious look at this exciting time by any measure.

CoWorking Space, Hospitality and Flexibility

 

Neue House in New York, a new take on coworking space

Neue House in New York, a new take on coworking space

 

Executive suites or what is now coworking space,  can be seen to have really taken off when Regus came along in 1989 . They’ve worked well both for traveling business people who either aren’t staying in a place with a business center and for small businesses, especially professionals, who want maximum flexibility which comes with short term leases and low rent.

They’re also seen as very “corporate” which works well with some businesses , but less well with creative types. Enter coworking spaces which started in the West Coast, in Silicon Valley (called “incubators”), and are now spreading and really coming into their own.  The West Coast was also a breeding ground for a new kind of office – office as campus which lends itself to social interaction, such as ones from Facebook, Google and Microsoft.

On the private front, the sequel to Regus were incubator type formats  with not only private offices, but dedicated desks for rent, and for even less money, a flexible desk which is a space at a long communal table.

And now, uber designer David Rockwell has come up with a work collective membership model as glamorous work space called NeueHouse, pictured here, described in this month’s Departures magazine (and another interesting article on the topic in CNN Money). The 50,000 square foot New York building is a combination coworking space, members club and cultural center. As Tracey Ryans, a luxury marketing strategist described it,  “they took the best of what Ian Schrager did with hotels, what Nick Jones did with restaurants and bars and what the kids in San Francisco did with the shared work space and combined them.”

The ground floor has what Rockwell calls “Spanish Steps”, plywood stairs with kilim pillows that serves as a meeting and work area during the day and at night is the setting for lectures and presentations. Recent cultural events include a lecture by designer Paul Smith and a conversation between a string theorist and a steel drum player. NeueHouse also has access for members to resources like a 1Gbps internet connection, video editing suite and 60 seat screening room. Sounds to me like a model for expansion.

And for those in the hotel industry, this might be a new offering for a hotel loyalty program with a membership based business center? What do you think?

Insatiable Luxury in China

luxury in china

Peninsula Shanghai image from www.sienacharles.com

Post by Karen Weiner Escalera

We’ve all read about the boom in sales of luxury products in China. But nothing prepared me for the reality — the quantity and size of stores of the big names in luxury brands. Staying at The Peninsula Beijing, within two blocks there were several Chanel stores, one larger than the next. Within the hotel itself, besides the entrance being flanked by Chanel and Louis Vuitton shops, there’s a two story arcade exclusively with all the big brands. And this is repeated throughout the city.  Curiously, walking past the shops there was seldom anyone inside. Why? Our guide said that wealthy clients get the brochure of the new collection (or see it online), call the shop, and have the item or items sent to their residences much as mere mortals would order take out food.

I asked the same guide why there weren’t more top Chinese fashion designers. She said why would anyone buy a local fashion brand and pay a lot for a name no one knows. Anyone in the luxury business should not miss a visit to the “knock off” multi-leveled emporiums – the Silk Market in Beijing and several in Shanghai. It’s fascinating to see what brands are being counterfeited besides the obvious – Hermes, LVMH, Prada, etc. Beats headphones and speakers seem to be “hot” items. No wonder Apple recently announced a possible purchase of Beats. It was also interesting to see how luxury brands have to quickly come out with new lines to stay ahead of the counterfeiters. Of course new models help fuel purchases but you can’t help thinking that in any case, this counterfeiting greatly debases the brand.

Speaking of luxury and hotels, I also had a chance to see the latest in hotel technology in action by the master, Peninsula. At the hotel in Shanghai, here are some of the picks for top features:

  • Built in “nail dryer” in the dressing room
  • VOIP for free international calls
  • Humidity control for the guest rooms
  • Preset internet radio channels
  • A Yamaha speaker built into a lacquered cabinet, totally unobtrusive
  • And then the bathtub that even they have taken up a notch: luxuriate in the tub watching tv, having a conference call by speaker phone, choosing your favorite spa music, and more

All this being said I kept asking if and when the bubble will burst. As someone said, throughout the country there are thousands and thousands of unoccupied apartments bought for speculation (said one friend, in China the crane is the national bird). Makes for an unstable situation, no?

Using Art to Sell Real Estate

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The latest luxury real estate trend: high end condo developers have found the perfect new amenity — art, and they’re using it to generate buzz, separate themselves from the competition, and for community relations, according to a recent article in the Wall Street Journal.  New York and Miami developers are leading the pack in this innovation.One of the more creative uses of art is to make friends in the neighborhood before the building’s opening by holding a monthly tour of area galleries.  For instance, the lobby turns into an art gallery every six weeks at 350 Bleecker in New York’s West Village, complete with an opening party for 50 to 75 people and actual sales of the art. An invite to a potential client becomes a social event and time for bonding.

Probably the boldest initiative is from Argentine hotel and real estate developer Alan Faena (hotels in Buenos Aires and Rio de Janeiro) who is building a $100 million exhibition space called Faena Arts Center by starchitect Rem Koolhaas that will make the development (pictured here), which includes a hotel, a cultural destination. It will feature art exhibits and dinners with visiting artists. The Faena Group also sponsors an annual art award with $75,000 in prize money ,and commissions original work as well. Also in Miami, the new Oceana Bal Harbour has commissioned $14 million in art from mega artist Jeff Koons. After five years, the art can be sold upon an 80% majority vote of homeowners. Similarly, at the Ritz Carlton Residences in Chicago, buyers of apartments selling for $1 to $11 million will get a share of a half million dollar art collection. They can choose to change it or sell it and split the proceeds. It will be fascinating to see how this plays out as, though it’s a noble effort, if you’re ever been on a condo board you know how contentious even the smallest thing can be.

Pop Up Furniture Used to Sell Luxe Homes

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Prop furniture or what is now called pop up furniture is making a comeback, taken to a new level with cardboard bed frames, “upholstery covers”, and even 52 inch televisions.  According to the Wall Street Journal, a two bedroom apartment can be furnished with four nylon bags of origami-like polypropylene furniture, ideal for staging a luxury apartment for sale. Companies such as informed Space make this furniture which costs about one third the price of traditional staging.   And it can all be done in a few hours. Another company, Real Electronic Props makes replicas of flat screen tvs  of up to 52 inches but are pushing it, trying for a 60 or 65 inch model. They look identical to the real thing except there’s no electrical wiring. Besides price, another reason for the popularity of the fake electronics (including videogame consoles, laptops and tables) is avoiding minor theft, a part of open house tours. So next time you go on a house tour, look carefully before you sit down!

Online Shopping of the Affluent

It’s no secret that consumers have increased their spending online. In 2009, comScore, a leader in measuring the digital world, reported holiday season retail e-commerce spending topped just $20 billion. Not too shabby until you compare it to this year’s report of $42 billion – a 110% increase.

A recent article on online spending had us thinking: Do the online shopping trends translate to the affluent consumer? YES! Perhaps even more so… According to the article in Luxury Daily, “Affluent consumers are 40 percent* more likely to make a purchase on a luxury retail Web site compared to non-affluent consumers.”

One of those websites catering to the extremely rich – The Billionaire Shop.

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Latest restaurant gardens – rooftops

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