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This is part of a new series unravelling the post-pandemic shifts from consumer behaviours to luxury store footprints.
The latest Tod’s store opened a few weeks ago. The small, 1,700-square-foot site is festooned with illustrations by Italian artist Andrea Torelli and printed wallpaper, aimed to evoke the joy of summer in Portofino. And it’s fitting for the location: Newtown Lane in New York’s East Hampton. “We’ve never had a store there before,” Tod’s North America president Roberto Lorenzini tells Vogue Business. “We looked a few times, but it never became concrete. But the last year has definitely changed the dynamics a little.”
He settled on this site, a former Tory Burch store, late last summer. “We had to be where our clients were spending most of their time, and because of remote working, this is where they spent more of last year. We stayed close to them digitally, but we had to find the right spot to be physically close to them, too.” The Newton Lane boutique is officially described as a ‘seasonal pop-up’, but it will remain open well into the autumn; he also has major plans for the holiday season between Thanksgiving and New Year. Lorenzini won’t disclose the tenure of the lease, other than to say the firm is monitoring it for the year and will decide whether to continue then.
Seasonal retail was once at best a footnote for firms’ bottom lines. Outlets in resort communities were considered optional, perhaps trialled on a whim to road-test collections or if the owner had a home nearby. The pandemic upended those established but unwritten rules. Second-home sites have instead become semi-permanent bases for many well-to-do Americans, decamping from cities for more space and security during Covid-19. They’re likely to maximise their time there, too, after new buyers in resort communities paid premiums for their privilege — the median price of East End real estate, for example, rose by a staggering 40 per cent year-on-year in 2020.
The change in the resort retail landscape has been radical, at least according to Joel Isaacs. He runs Isaacs & Company, a New York-based commercial real estate firm with particular expertise in high-end retail. It was Isaacs who helped wrangle the lease for Tod’s in East Hampton, as well as those for both Balenciaga and Gucci, arriving nearby soon. “I’m still getting calls about pop-ups in mid-May, but when most people learn about the rents, they decide against it,” he says. Per square foot costs in East Hampton, still the most desirable location, average $150 or more for 2021, a rise of around 20 per cent on pre-pandemic rates. By comparison, per Isaacs, the luxury strip on Bleecker’s Street’s western fringes in Manhattan would cost in the low $200s, while much of Soho costs $300 or less.
Traditionally, enquiries for seasonal retail started in January. Not only are those calls coming later, then, and in greater numbers, but landlords are also unsure of leasing seasonally or for conventional pop-ups. Before the pandemic, Isaacs explains, owners had started to push tenants to take 10-month leases, starting April and concluding in time for a build-out by the next occupant. “Even with attractive brands this season, landlords are tightening their expectations and insisting on two-year leases, especially as the market gets tighter,” he said. It’s a boon for brokers like him, of course, who are paid on a percentage of the rent; for deals of one year or less, it’s typically 10 per cent of the total, but a five-year lease on the same site would earn him 20 per cent of the first 12 months’ charges.
Commercial retail rates in other resort communities have also crested in the wake of the pandemic. Take Aspen. Lex Tarumianz is a commercial and residential broker with Sotheby’s there. A+ commercial property, he says, is fetching around $250-300 per square foot, a rise of 25-30 per cent versus 2019; add 25-50 per cent on top of that if the site is temporary or some kind of pop up, he adds. “Even if they just want to use it for three months, now we’re looking at tenants having to pay five or six months to get a pop-up,” he tells Vogue Business.
Tarumianz and his colleagues had expected a frenzied winter season, but a spike in Covid-19 cases in Colorado in October last year – and the resulting three-week shutdown — dampened the market somewhat. By Q1 2021, though, activity had returned. Audemars Piguet and Hermès signed long-term leases, for example, while the likes of Armani and high-end New York restaurant slash cocktail bar Dante took temporary spots. Perhaps the most intriguing and significant deal at that time was news that Restoration Hardware would invest $105 million in the town, becoming a part-owner of a chunk of Downtown, which it intends to reboot as a micro-neighbourhood featuring RH-branded retail, a hotel and spa, plus residences.
Such changes in resort retail aren’t simply reflected in rising prices, either. Take co-tenancy, which some brokers say is diminishing in importance. Making a statement with a store could be more important than bunching in a luxury cluster; Joel Isaacs points to Sag Harbor, for example, where there’s rising interest among high-end names in its artsy vibe. Brandon Singer agrees. “When a brand is strong now, they don’t need to be near anywhere else, mostly because of social media,” he says, “They can make a market for themselves.” Singer was a longtime broker at commercial real estate firm Cushman Wakefield before setting up his own advisory firm, Retail by MONA, last year – in part in response to the opportunities he saw in retail’s changing landscape.
He expects to see resort retail mimic what has happened in urban sites, as with the deal Singer worked on with streetwear brand Supreme. It moved to a derelict building on New York’s Bowery for a short period while its flagship was renovated, far from rival brands like Kith. The temporary site was too successful to surrender, and instead, the firm abandoned its original location. Look at ultra-small footprints, too, Singer suggests; holding a site for 12 months in a resort community is much less risky if the square footage, and so cost, is minimised. Look at Blank Street Coffee, for example. “I got a call from them the other day, and they said, we want a 50-square-foot site, and we’ll sign a lease for a year — it’s basically a little coffee kegerator, a sign, and four walls,” he says.
As the concept of seasonal retail is upended, a slew of startups has entered the space aiming to address the new challenges. New York City-based FlagshipRTL is one such firm, hired by clients as a turnkey operator for physical retail — think of it as Shopify, for real life. Rethink how to fund those seasonal brick-and-mortar sites, claims founder and CEO Justin Abrams. Treat them more like interactive ads than conventional profit centres, and share overheads across both marketing and operations P&L. “The store is a living, breathing billboard you can sell from, and anybody who needs to spend their media budget to acquire customers could shift it from digital to IRL.”
FlagshipRTL might take on a lease itself, as with a current site in Greenwich, Connecticut, and cycle through a season-appropriate client as tenant — Moncler, for example, which filled the space from November 2020 through March 2021, before Proenza Schouler took over as the current tenant that same month. It could also help clients secure and operate a standalone site, as it did for baby brand Bonpoint in the Hamptons last summer. Bonpoint opted for a different version of FlagshipRTL’s try-before-you-buy approach, agreeing to a temporary tenancy in a given locale – that’s usually around six months, with an option to extend. Abrams and his team handle negotiations with landlords.
In Bonpoint’s case, its Southampton site came together in just two weeks in time for last summer; the firm emailed its database of Manhattan-based clients to announce that it, like so many of them, had moved out East. At season’s end, per Abrams, that pop boutique ended up as one of the most profitable in the company. And per its flexible lease, Bonpoint had an option to extend, which it exercised.
That decision was powered by the understanding that sites in seasonal locations can profitably be retained year-round, but they must remain flexible if so, adjusting operations and services. In the off-season, cut opening hours, Abrams suggests, and reboot the site as a by-invitation clienteling salon for private shopping, or adapt its fit-out to be better suited as a distribution point for online shopping, perhaps allowing the brand to offer delivery within an hour for nearby customers.
It’s certainly an approach that Tod’s president Lorenzini is considering. He’s staffing the East End boutique on rota with the staff from the brand’s Manhattan flagships, which allows him to adjust according to demand – if it remains high off-season, for example, he can keep a larger team there. “Being in the Hamptons isn’t just an afterthought — we have a presence here where we can host our clients,” he says, noting that shopping by appointment might be an off-season perk offered to key clients, “Locations that used to be seasonal? Now they have a totally different business model.”
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