Mixed-use development redefining NY retail scene.

As retail continues to flourish in New York City and the outer boroughs, the fast emerging trend toward mixed-use retail, entertainment and residential developments will redefine New York's retail scene as we enter the next century.

Dynamic, high-profile projects of rare caliber, the new mixed-use developments offer retailers some of the best real estate opportunities and bottom-line value that New York has seen in years.

Pivotal mixed-use retail, entertainment and residential projects currently underway in Manhattan include: Union Square South, Battery Park City North, and 56th Street and Broadway. Those currently in the development phases include: the Coliseum site; 42nd Street, where Forest City Ratner, Tishman Realty Corporation and Milstein Properties all have plans for new hotels; Rockefeller Center, which is also creating plans for a hotel in conjunction with its new retail plan featuring Christie's auction house; the 14th Street Armory; and Harlem USA, a major new retail and entertainment center that has already secured such giants as Disney, The Gap, and Cineplex Odeon. Projects of equal magnitude and importance underway in the outer boroughs include: Gateway Plaza, Fulton Landing, and the Rockaways.

As these projects take root in the marketplace, they will dramatically shift the order of New York's major retail and entertainment destinations for years to come. Whereas major retail corridors traditionally have been defined by a singular retail anchor such as a major department store, the mixed-use developments will create new centers for recreation and living in New York.

As linchpins in the urban fabric, the new developments and their unique programmatic mix promise to capture - within the confines of a single city block - the synergy of residential, retail and entertainment events found in the average New York neighborhood. Far from turning their backs on the surrounding community, the best of the new mixed-use developments will serve to enliven and rejuvenate the areas which they serve to define.

The recent Lincoln Square Development created by the Millennium Partners serves as a model of one of today's most successful mixed-use developments. Combining residential condominium towers above superstores and a Sony movie complex, the positive impact of such developments is a vital urban center that completes the retail landscape of the Upper West Side.

If today's market may be characterized by aggressive growth, a tightening supply of space, and a "bigger is better" mentality on behalf of retailers that continues to build through 1998, the pent-up demand for the high quality retail space offered by these mixed-use developments will reach unprecedented heights within the next two years.

Underscoring New York City's retail growth in every market sector from luxury brand names to big box retailers, major national credit retailers - anxious to either establish a flagship location in New York or expand their current presence - are hungry for large floor-plates and locations that serve as suitable platforms for their retail venues. As vacancy rates along 57th Street and Madison Avenue approach zero, the new mixed-use developments offer retailers particularly those with brand-name attraction - favorable leases, optimum retail configurations and premium market position.

In short, today's mixed-used developments offer major retailers a deal that is almost too good to be true.

Rather than having to incur the costs and additional operating expenses common to conventional retail leases in New York City, the current mixed-use developments offer big box retailers a retail unit with minimal ground floor presence connected to maximum selling areas on the adjacent lower, second and third floor levels. With big box tenants absorbing the lower and upper levels of a mixed use development's retail block, typically at favorable base rent prices, landlords can enhance the value of their remaining ground-floor space by attracting restaurants and specialty retailers willing to pay higher rents for premium space and street frontage.

Given their potential to create a destination as well as spur growth in the immediate area, the new mixed-use developments frequently offer retailers unmatched market position and bang for their buck. Whether projects are developed to jump-start the emergence of a surrounding market such as the new Battery Park City mixed-use hotel, multiplex movie theater, public atrium and health club complex being developed by Forest City Rather Companies, or projects are developed as the crowning achievement of a market's renaissance, as is the case with The Related Companies Union Square South and the 14th Street corridor, the new mixed-use developments guarantee retailers a healthy share of the public limelight by creating a hub of pedestrian and urban activity.

The balance of the entertainment and retail mix offered by the new mixed-use urban centers further bolsters the strength and market appeal of them to major retailers. By offering a non-competing use such as movie theaters guaranteed to draw a healthy flow of pedestrian traffic - many of whom have time on their hands while waiting, for example, for a feature to begin - the mixed-use development represents the best of all possible worlds for retailers such as Virgin Megastore, Gameworks and The House of Blues, anxious to take advantage of such a prime opportunity.

Developed by high-profile developers such as The related Companies, Forest City Rather Companies, Millennium Partners and Vornado Realty Trust, these high-profile projects typically reflect a superior quality of architectural design and construction benefitting tenants, users and New York City across the board. Developers, sensitive to the impact their projects will have on the immediate neighborhood as well as on the broader landscape of New York City as a whole, are willing to make the investment necessary to create a project of leading architectural quality, character and design that will endure with time.

Case in point: The competition for the Coliseum site has brought some of the most noted architects, including Skidmore Owing & Merrill, Kohn Peterson Fox Associates, Cesar Pelli & Associates, Robert A.M. Stern and Costas Kondylis to the drawing board. Similarly, the competition The Related Companies held for the design of Union Square South solicited the participation of civic groups and community members in selecting one of the most innovative architectural designs seen in years for a mainstream development project in New York.

In addition to exercising considerable pull in the overall design of the retail and entertainment components of new mixed-use development, retailers signing on early in the development project benefit from ensuring that their specific operational requirements in terms of floor-plate configurations, services and exterior showcase opportunities are met to the fullest.

Far from being a phenomenon unique in the primary Manhattan markets, the new mixed-use development trend is positively rejuvenating the retail scene in Harlem as well as New York's outer boroughs, where bib box retailers are clamoring for position. Developments currently in the spotlight include: Harlem USA, which is drawing such retail and entertainment giants as The Gap, Cineplex Odeon and Disney; Atlantic Center, a 400,000 square-foot, multi-level development anchored by Caldors and home to such major national credit retailers as Circuit City, Sports Authority, Old Navy and Marshalls; Gateway Plaza, a major mixed retail and entertainment center with a movie theater complex likely to attract such tenants as Virgin megastore and bed, Bath & Beyond; and Fulton landing, a proposed mecca of restaurants, stores and movie theaters situated along the waterfront between the Manhattan and Brooklyn bridges.

Provided the bull market continues to run wild and the expectation of retailer continue to run high as we head toward the close of 1997, the quickly emerging trend toward a mixed-use development should take root in the marketplace, carrying New York's retail scene to new heights as we approach the new century.