International Invasion By Zaid A. Midani T he United States retail market has become fertile ground for foreign born retail concepts, poised to take advantage of a weakening dollar and a more welcoming business climate. These new-to-us retail concepts may spell trouble for domestic brands, but could also provide a much-needed infusion of excitement and capital into a slowing and aging U.S. retail sector. When the dollar began slipping several years ago against other global currencies, particularly the Euro, Manhattan started seeing unprecedented numbers of Europeans crowding stores in search of "discounted" merchandise. In reality, the dollar had weakened so much so that even the added cost of airfare and accommodations could not offset how much cheaper it was to purchase clothes and electronics in the United States. With international retailers feeling the pinch, they are now following their loyal customers to America. The United States offers many advantages to foreign retailers beyond just recapturing European consumer spending. The devalued dollar has made all elements of operations more affordable in the U.S.. Average hourly manufacturing wages in Europe are 57% higher than in the U.S., according to the Bureau of Labor statistics. The favorable business climate is giving them a decisive advantage over domestic concepts and now for the first time they feel confident that they can compete for a bigger share of the mighty U.S. consumer dollar. New York City's fashionable shopping districts seem to be packed these days with new foreign shops. Most brokers agree that these foreign concepts are helping keep Fifth Avenue rents up despite the economic uncertainty. Whether it's through Saks, Cartier, Bergdorf Goodman or the Apple Store, the branding of Fifth Avenue is as critical to retailers as the foot traffic and wealth that comes through. Saks reports that 20% of company-wide sales are generated by their Fifth Avenue flagship and that 20–25% of those sales are to tourists. Retail rents on Fifth Avenue remain the highest in the world at $1,500 per square foot. The next most expensive retail real estate in the world is Causeway Bay in Hong Kong, Avenue des Champs-Elysees in Paris, New Bond Street in London, and Ginza in Tokyo. The category that is mostly likely to impact large and small markets inside the U.S. is discount fashion apparel — or "cheap chic." Sweden's H&M was a trail-blazer in this category when they opened in Manhattan and quickly grew to over 150 stores over the course of a few years. Although this category accounts for only 1% of the U.S. apparel market today, it is expected to rise dramatically to levels in Europe that approach 20%. European concepts are not the only ones rushing to America's shores to capitalize on the weak dollar. Brands from Canada, South America and Asia are also arriving in spades. At a time when many U.S. brands are struggling, this influx could be a boon to retail real estate operators facing mounting bankruptcies and store closings. On the opposite page is a collection of some of the hottest concepts that the industry should be watching. Zaid is Director of International Business Development in our Washington D.C. office. He can be reached at (202) 741-3800 or zaid.midani@madisonmarquette.com. P Next Generation Retailers Zaid A. Midani Director of International Business Development Zaid is involved in acquisitions, corporate planning and strategy for Madison Marquette. He has over 6 years of investment and commercial real estate experience including due diligence, underwriting and project leadership. Zaid attended Indiana University and earned a Bachelors degree in Economics and Political Science. He is an active member of Arab American Bankers of North America (ABANA), ICSC, and ULI.