Manhattan retail poised for another record-breaking year.

Real estate experts understand that for a comprehensive overview of the market, one must survey all sectors, from residential to retail. We are a city of shopaholics, but also a city where a fashionable address is of the utmost importance. It is not surprising that the luxury additions to the retail landscape correlate with Manhattan's unprecedented residential boom.

In the past decade, the average sales price of a Manhattan apartment has increased by nearly one million dollars, to $1.3 million, according to Prudential Douglas Elliman's Manhattan Market Report. Manhattan's residential market has surpassed all expectations, showing the most growth between 2000 and 2005.

When ranking by price per square foot, downtown neighborhoods demonstrated major gains. Rates for condos in Greenwich Village appreciated more than 26% since 1997, while Soho and Tribeca increased by 17%. In the co-op market, prices per square foot rose 40% in the East Village and Lower East Side. Midtown East and Turtle Bay also posted gains of nearly 40%.

As phenomenal as the residential market has been in the last ten years, retail real estate has broken even more records.

It is no coincidence that luxury retail corridors are located by some of the most sought-after condominiums and co-ops.

Landlords agree that upscale retailers not only enhance the neighborhood, but also help attract like-minded residential clients.

This upward economic trend has led to an acceleration in expansion plans by our favorite apparel companies. Shoppers nationwide have demonstrated their indelible spending power, encouraging many stores to launch aggressive rollouts.

J.Crew, which recently expanded its clothing lines to include childrenswear, has disclosed plans to open 37 new stores--each totaling around 5,500 square feet--by the end of 2007. The label enjoyed a 21% increase in sales during 2006, and believes that its already strong catalog sales will translate into higher in-store revenue. In 2005, the store opened only five new shops, while in 2006 it inaugurated 24, bringing the current count to 178 retail stores and 51 factory stores.

Tiffany & Co.'s expansion plans extend beyond the Financial District to the entire country; in fact, the legendary jeweler's immense profits in recent quarters has led to plans for as many as seven new stores this year. Tiffany posted more than 5% gains last year, when they opened stores--roughly 5,000 square feet each--in Nashville, Indianapolis, Atlantic City, Tucson and Hawaii.

Ann Taylor is another designer who has enjoyed great success, with 869 stores already open. The coming year will see the addition of 60 Ann Taylor LOFT stores, catering to the value-conscious sector--a population that has produced the best financial results for the company. The company also excited many shoppers when it announced plans to unveil a new brand concept in Fall 2008.

Though details are still unclear, the designer seems confident that it will be a sensation. Some stores already carry a full Ann Taylor array of beauty and bath products, fueling rumors that this new brand will be an expansion of their beauty line.

I predict that momentum will continue to build this quarter, propelling us through another robust year for retail leasing and sales.

The residential and retail markets will continue to thrive in tandem, and retailers will cater to their audiences by unveiling new stores, each more spectacular than the first.

FAITH HOPE CONSOLO, CHAIRMAN,

RETAIL LEASING AND SALES DIVISION

PRUDENTIAL DOUGLAS ELLIMAN