What’s In Store: High Retail Rents

1205774094For spring, hemlines aren’t the only thing on the rise: High-rents are kicking small boutiques when they’re down.

When Zara was announced as the new tenant for the huge space recently vacated by the Armani Café, we have to admit that we were slightly ecstatic. Not only because we could now avoid the billowing cloud of cigarette smoke and Acqua di Gio that hung over the place, but also because it meant more big names in Boston. And when rumors of new store openings include names like Prada and Dolce & Gabbana, we can’t help the visions of spacious flagships and snooty sales associates which dance in Bostonista’s head.

Despite our fervent desire for Newbury Street to rival 5th Avenue, wish fulfillment comes at a price: the loss of the little guys. The deep pockets of companies like True Religion, whose new store will be a modest 2,000 sq. ft., and Zara (at 24,000 sq. ft.) are giving realtors reason to raise the price per-square-foot of their larger properties, ultimately pushing out some of the independent stores.

Sean, a favorite Euro-centric men’s clothing boutique on Newbury, is moving to a new (smaller) South End location at 76 Dartmouth Street (near Appleton) on April 1 because of the rent hike. “The landlord actually wanted to vacate our space and the space next door and create one large space that would rent at a much higher amount,” says manager Mark Connolly.

Connolly, who managed Alianza Contemporary Crafts on Newbury for ten years until 25 percent rent hikes forced it to close two years ago, pointed out that another nearby store, the European Fashion Boutique, recently closed due to the inflated rent prices. “She had her rent doubled,” he says. “So she just decided to call it quits. I can’t tell you how many people that I’ve talked to that are on the edge of moving off of Newbury.”

Betty Riaz, owner of 800 sq.ft. Stil, says, “When I first moved in four and a half years ago, rent was fairly reasonable on our block, but since then, Newbury has gotten more popular with the mainstream stores.” That interest from national chains means raised rents when leases expire, often too high for indie stores to manage. Riaz signed a five-year lease in 2004, so she’s locked in a pretty good rate at around $80 a square foot — for now, at least. “The nature of the business is that [rents] will increase when your lease ends,” she says. “We are in a recession—it’s full blown. People cannot afford to do the kind of business that they were doing even last year. Stores are suffering. Everyone is cutting corners.”

So will the South End become the SoHo to Newbury’s 5th Avenue? “If we hadn’t found this place in the South End, we probably would have left Boston,” says Connolly. “I think the neighborhood stands a chance of getting a certain amount of the boutique business in the same way that it has a selection of the cutting-edge gallery business,” though warns that there is a very limited number of retail spaces available, just as in Beacon Hill. This is why he actually welcomes the arrival of the Mandarin Oriental, which he thinks will bring more affluence and new customers to the Back Bay. Riaz told us she put in a proposal at the new hotel, but simply couldn’t afford the price of admission.

All is not lost though! As long as other boutiques can make as smooth a transition as Sean, Bostonista will be happy to walk the extra mile to Harrison or Washington. Connolly says that already he’s seen an influx of interest in the South End. “We sort of did this with fear and trepidation at first,” Connolly says, “but we have gotten such great feedback from all of our customers.” All those tourists get in the way, anyway.

-William DeGregorio