Manhattan retail continues to show long-term strength.

With tremendous activity, significant demand and limited product availability throughout the first quarter, Manhattan's retail real estate market continues to prove its long-term strength. SoHo, Times square and segments of Fifth and Madison avenues are leading the way in an environment where both rental and sale prices are extremely strong.

One of the most noteworthy trends influencing today's growth relates to national retail presence. Although an unprecedented number of national retailers has infiltrated the New York market in the past few years, the city has not reached the saturation point, as so many suburban markets have. Going forward, there will be more than enough shopper demand to justify the entry of additional national retail throughout Manhattan.

However, new retail construction remains limited, and there are not many new shopping districts available to tenants. As a result, the amount of available and desirable space is simply not equal to the immediate tenant demand.

Intensifying the squeeze on available space is the trend away from second-floor retail. Before office rents escalated in Manhattan, accompanied by a residential boom, there was an economic benefit to the landlord in having a retailer occupy the second floor of a given building. Now, however, with the exception of certain high-rent districts, the market has shifted back toward using the second floor as residential or office space, because the economics make more sense. This trend is increasing the demand of big-box retail users, because multi-floor space is in many cases being taken off the retail market and offered to a different type of occupant.

In essence, many retailers are in somewhat of a bind. Though they face high rents and limited space availability throughout Manhattan, they want to be here to capture the benefits of the city's health. The local economy and quality of life have improved by leaps and bounds in recent years, leading to outstanding retail traffic from both residents and visitors.

Given these dynamics, it seems likely that certain untapped corridors with room for new construction will become the new shopping districts. For instance, destination retail has been progressing steadily West on 34th Street - which makes sense, given the status of Penn Station as a transportation hub. This area's appeal will only increase when the new Amtrak station begins construction on the west side of Eighth Avenue and the new mixed-use project adjacent to 5 Penn Plaza goes into the ground especially since rents there will be extremely competitive with established retail rents east of Eighth Avenue on 34th Street.