Manhattan's retail market still strong.

As we enter the second half of 2001, it has become apparent to everyone in the real estate community that the retail market has not taken the dramatic fall that many had anticipated. In spite of the abundance of "doom and gloom" forecasts for the national economy, part of which resulted from poor year-end retail sales in 2000, retail is here to stay. Although the forecast for the real estate market is difficult to accurately predict, it seems that the rest of the year holds positive things for the retail sector, especially in Manhattan.

Certainly the negative economic news has had a significant psychological effect on consumers and has translated into a marked shift in the real estate market. The retail market is just starting to feel the fall out. Retailers are being cautious and many have adopted a "wait and see attitude," but for the most part, deals that were signed a few months ago are still being executed and retailers continue to seek new space. The difference is that retail space is not renting as quickly as it did six months ago. Tenants are not willing to stretch as far to make a deal and landlords are being more flexible. Retailers are willing to pay fair prices for expansion space but the auctions we saw in the past are just that, a thing of the past.

I am finding that most of Manhattan's prime retail areas, such as Madison, 57th Street, Fifth Avenue, SoHo, Flatiron, Upper West Side and Upper East Side, seem to be unaffected. The luxury retailers still have a big appetite for retail space in high-traffic areas and rents remain strong.

A glut of sublease space has been put back on the market as a result of the bevy of dot-com failures and spate of employee layoffs. While this has disrupted the office market, causing asking rents and effective rental rates to decline and landlords to offer generous concessions, the effect on retail has not been nearly as dramatic. Hesitance will continue to exist in 2001, but the retail market will hold strong.