Affordable retail space remains a scarcity in NYC.

As the price of leasing retail space continues to surge in the New York Metropolitan area, the group that may be affected the most are local, often family-owned businesses who struggle to find prime real estate at affordable rates. The difficulty for these family-owned companies is competing for space with national retailers, who generally have a greater ability to meet the monetary demands of leasing a unit on a major street in Manhattan.

A busy commercial and residential street such as 23rd Street, home to Home Depot and Best Buy, and also in close proximity to Madison Square Park, is a highly desirable location for any business, but meeting the top dollar asking price psf is an enormous challenge.

Despite these challenges, there are some who are dedicated to advancing the best interests of local businesses. Two units, at 132 West 23rd Street and 134 West 23rd Street, both managed by Tri Star Equities, are only leased to local or family-owned enterprises. Previously, the space was occupied by a hardware store and an office furniture store, both local merchants. However, nearby large chain competitors such as Home Depot drove the smaller private companies out of business, leaving vacancies for local companies.

Senior agent Laki Latinka Igrutinovic of City Connections Realty, Inc. handled the leasing of the units. Despite inquiries for asking prices within the first two months on the market, the landlord was firm in only accepting local businesses: The landlord was also specific in wanting to sign a 10-year lease, further narrowing the pool of prospective businesses. Finding the right tenant took six months for the first space and eight months for the second space.

The unit at 132 West 23rd Street was filled by Madeline Patisserie, owned by Mr. Pascal Goupil, who is recognized as making the best macaroons in the city. Mr. Goupil relocated from nearby on 128 West 23rd Street after the lease on his unit expired. During his search for a new retail unit, he was faced with the difficulty of finding a location with affordable rent and a significant amount of foot traffic, which his business relies on heavily.

First opened in the East Village, Mr. Goupil found there was not enough regular traffic to run a sustainable operation. He also tried renting a unit in Chelsea Market, but was forced to cater to the lunch crowd, which detracted from the company's main specialty. Finally, despite some hesitation because of rent prices, Mr. Goupil moved his operations down the block on 23rd Street in order to attract a greater volume of clientele. The combination of customers in the area who are upscale, yet low key, make it possible for him to sustain his business.

The tenant of the 134 West 23rd Street unit is Platinum Hair Salon, a high-end hair salon operated by Mr. Rick Kelly. Mr. Kelly hopes to have a grand opening of the salon in November 2008. Prior to signing a lease for this particular location, he searched for a unit for about two months.

Mr. Kelly was specific in wanting to be in the Flatiron or Chelsea areas, particularly on either 5th Avenue, 7th Avenue or the major crosstown streets of 14th Street or 23rd Street. For Platinum Hair Salon, the location and walk-in traffic from the area is crucial to jump start its initial business. The convenience of being near several major train stops as well as the crosstown bus will make the salon easily accessible for new and returning customers.

The Platinum Hair Salon unit is an 1,800 s/f space that includes a basement. The extensive renovation of the space included laying down new flooring and duct work for the air conditioning system. The walls have also been stripped down to the exposed brick to enhance the industrial and modern design scheme that will ultimately give the salon a hip, laid-back and fun atmosphere. Mr. Kelly believes the salon will attract a variety of customers from teenagers to working professionals, all looking for optimum customer service at a reasonable price, with haircuts starting at $39.

Much like Madeline Patisserie, Platinum Hair Salon's reliance on walk-in customers to build its business, was the deciding factor in choosing the right retail space. Though Mr. Kelly paid slightly more for the space than he was initially looking for, he noted, "The location is absolutely vital for our business model. We plan to draw customers in with our amazing decor and talented stylists and we could not do that unless we were situated on such a busy street."

As the price psf in retail units continue to grow, local businesses are constantly faced with the challenging trade-off of price versus a prime location that draws in customers. Though the market is difficult for small companies, there are still opportunities because many New Yorkers still believe in the necessity of advancing the interest of local merchants.

As Ms. Igrutinovic notes, "... the market makes it more challenging to meet the needs of my clients, but given time, there are still great possibilities, as demonstrated in this deal we brokered on 23rd Street. As we've seen, many times the more expensive retail locations will certainly pay off in the end with the amount of customer traffic they can attract."