Northeast: Surviving the Downturn
Like all other regions of the U.S., the Northeast is feeling the effects of the economic downturn. However, its unemployment rate remains lower than that of any other area
Philadelphia
ECONOMIC OVERVIEW
Though home to many financial fiascos, the Northeast's economic picture is challenging, but not as grim as many other areas of the nation.
JOB LOSS
While it's faring better than other areas, this region saw a jump in unemployment this year and a downslide in consumer confidence at the same time. According to the Bureau of Labor Statistics (BLS), the unemployment rate grew here from 4.9 percent in April 2008 to 7.9 percent in April 2009, when more than 2.2 million people in this crowded region were unemployed.
MOST SKEPTICAL
Though their unemployment rates were lower, Northeasterners remained skeptical about the economy. A May 2009 survey by BIGresearch revealed that 74.4 percent of people in the Northeast said they were not feeling better about their economic situation, higher than the U.S. average of 71.6 percent.
SPENDING
Part of the reason could be that these residents saw their personal income fall by as much as 0.3 percent in the fourth quarter of 2008, according to the Bureau of Economic Analysis (BEA). "Consumers need sustained proof before they start to invest again in the economy," says Scott Krugman, a spokesperson for the National Retail Federation.
CPI/GDP
On a more positive note, the BLS reports that the Consumer Price Index (the prices paid by urban consumers for a representative basket of goods and services) actually decreased by 0.1 percent in the Northeast from April 2008 to April 2009, while it remained flat on a national level.
Looking at Gross Domestic Product in the Northeast in 2008, states such as Pennsylvania, New York, and New Jersey had much stronger results than the rest of the country, according to the BEA.
RETAIL REAL ESTATE
VACANCY RATES
A direct result of the difficult U.S. economy, retail real estate vacancy rates increased significantly in the first quarter of 2009 to 9.5 percent for the U.S. and a slightly more palatable 7.7 percent for the Northeast, according to Reis, Inc. Lessors looking to fill their space dropped rents accordingly to attract interest. In the retail mecca of Manhattan, asking rents saw a six-month freefall of 11 percent, the first drop since 2001 according to the Real Estate Board of New York.
New York
| OPTICAL FILE |
|---|
| LENS MARKET Polycarbonate plays a strong role among dispensers in the Northeast. • WORKPLACE. With a 14 percent usage, poly's strength in the Northeast may be due to more workplace settings requiring industrial safety lenses. In these settings, poly is definitely the impact resistant lens of choice, partly due to lower cost factors compared to other high-impact resistant lens materials. Conversely, use of Trivex was lower in the Northeast than the other regions (8 percent preference rating versus the Southwest's 26 percent). • LENS TREATMENTS. The Northeast also shows the highest preference for photochromic (26 percent), perhaps in an effort to create a one-pair-does-it-all economic choice versus two pairs. • PALS. The region is the lowest region in support for PALs—only 65 percent—versus standard multifocals. One reason: Many occupational contracts require standard multifocal lenses. EDGING STATS The Northeast is tied with the Midwest in consistency, as the same percent of practices in both areas (31 percent) are edging now as were a year ago. That said, the Northeast has the second lowest number of practices doing edging in-house (45 percent), perhaps because of the plethora of conveniently located wholesale labs in the region. Those that do edge in-house are likely ECPs who are adept at processing multiple lens materials and treatments and want to save in wholesale lab costs. …same as last year 15% …more than last year 9%… less than last year 45%… don't edge in-house FRAME FOCUS The Northeast is fighting a sluggish economy more aggressively than any other region with changes in product offerings as 54 percent of respondents noted changes in their pricing structures for the year to include more high-priced and low-priced models. • MATERIALS: Metal is the classic choice in the Northeast (58 percent), while plastic frames drew 31 percent of the market and rimless drew 11 percent. • PURCHASE PATTERNS: Conservative and cutting-edge blend in this region as 70 percent opt for new frames for every Rx update while 30 percent refill their existing frames with new lenses. • SECOND PAIRS: Leading the nation in clip-on selection for second pair at 15 percent, the Northeast also has a strong casual eyewear showing at 11 percent. Sunwear still leads the second-pair market at 66 percent while computer eyewear and readers reached 8 percent. • PRICING: Times are changing in the Northeast as frame pricing is moving to reflect expanding product options. Although 46 percent remained the same, 20 percent noted they were expanding to include higher price points, 15 percent were including new lower-priced options, and 19 percent were playing the odds and adding higher- and lower-priced choices. |
DROPPING RENTS
"The Northeast region is the second-worst-performing region with current quarter effective rent growth of negative 1.9 percent [and an average rent per square foot of $18.30]," says Chris Stanley, a research associate at Reis, Inc.
"While all regions appear to be suffering the effects of the slowdown in consumer spending, relatively ‘more expensive’ markets (in terms of rent per square foot) are registering larger magnitudes of rent drops. This is not surprising, given that this is the first time in 17 years that the American consumer has pulled back on spending, and more expensive markets are taking more of the brunt, given the pullback in consumer spending and business investment," Stanley says.
Boston
METRO MARKETS
Certain metro markets did, however, fare better than the whole (see sidebar). Northern New Jersey, ranked number four, also came up second in the U.S. for gross leasing area within new construction activity, showing more forward motion here than anywhere else in the Northeast or the country, according to the first quarter 2009 CoStar Retail Report. Other Northeast metros that ranked in CoStar's Top Ten for new gross leasing area include Westchester/Southern Connecticut, Philadelphia, and New York City.
The International Council of Shopping Centers reports that most retail real estate growth being realized in the Northeast is in mixed-use development, such as lifestyle centers that include shopping as well as hotels, residential buildings, and office space. "These are usually found in and around larger cities," says ICSC spokeswoman Erin Hershkowitz. "The benefit is built-in consumers who work and live within that complex." From an architectural perspective, new centers aim to capture the theme of the region, such New England fishing huts and villages.
FASHION TRENDS
While the Northeast has historically been the nation's fashion leader, the proliferation of information via the web and other media has this region losing a bit of its style edge. "For the most part, today, the major trends happen simultaneously across the country and this has to do with the media," says Paula Correri, a fashion editor with the Tobe Report, published by The Doneger Group, a retail analyst and trend forecaster for the fashion industry. "The consumer now has access to so much information."
| CITY FILE |
|---|
| According to Forbes.com, as of April 2009, the best small American cities for jobs and business are: 1. Odessa, Texas 2. Grand Junction, Colo. 3. Longview, Texas |
PACE SETTERS
Still, Correri refers to Northeast trendsetters as "the groovy girls on the coast" who are more adventurous and set the pace for the rest of the country. The Northeast also has more seasonal changes and, thus, more new fashion throughout the year.
"Even though there are all these media influencers, you need a certain confidence to pull off a new look—you need to feel like it's part of your tribe," says Rita Nakouzi, director of the U.S. office of Promostyl, a trend forecasting service.
ADVENTUROUS VINTAGE
One strong fashion trend to look for in the Northeast this summer and fall is an emerging vintage theme in ready-to-wear and accessories, says Correri. This theme extends itself to eyewear as well, with retro-inspired, smaller shapes.
![]({"src":"/media/ysuihnh3/72009.jpg","focalPoint":null,"crops":[{"alias":"thumbnail","width":1110,"height":700,"coordinates":null}]})