Outer boroughs retail market picks up steam.

While the Manhattan retail market has remained stable during the recent period of economic softness, New York City's boroughs have proven themselves to be a standout component of the city's retail sector, recording strong performance in both occupancy and rent levels. Retail property in the Bronx, Brooklyn, Queens and Staten Island remains in high demand, sporting low vacancy rates and rising rents, as retailers seek viable space and developers seek desirable sites.

Borough residents historically have been underserved, which has been a constant theme for years. However, the strong sales volumes repeatedly posted by the newly opened retail outlets in the boroughs have many regional and national retailers analyzing the potential of these areas, and some taking on the challenge. Retailers of all types are being rewarded for these efforts by crowds of borough consumers finally able to shop for items close to home for which they once had to travel greater distances to purchase.

Malls and retail centers are under construction or redevelopment throughout the boroughs. In Brooklyn, the Albee Square mall on Fulton Street is being transformed into the high-end 1.4 million-square-foot The Gallery at Fulton Street. In addition, at Atlantic Terminal, a 470,000-square-foot, Target-anchored shopping center is being constructed underneath a new 470,000-square-foot office building, while the Long Island Rail Road train station below is undergoing a major overhaul. In Queens, the Queens Center Mall is expanding from 606,800 square feet to 1.04 million square feet through the addition of a new wing and a fifth level on top of the existing mall. An existing JC Penney will expand to the new wing and make way for more specialty shops that will offer a diverse product mix, drawing a broader customer base. A multiplex cinema is also slated to be built directly across the street, on what is currently a municipal parking facility.

The Bronx is the only borough currently without a mall. However, one of the city's most successful retail developments, Bay Plaza, is expanding to include The Mall at Bay Plaza, which is currently under construction at the intersection of the Hutchinson River Parkway and Baychester Avenue. When completed the mall will contain 825,000 square feet on three levels and feature new Sears and Macy's stores, and more than 100 stores and services, along with the existing JC Penney.

While new and expanding malls continue to make headlines, retail activity remains robust in the primary shopping areas. In Brooklyn, Modell's has signed the first lease at the historic former Kenmore Theater, once one of the borough's best-known movie theaters. The sporting goods retailer leased 20,000 square feet of the 40,000-square-foot site, which is currently being redeveloped. Also in Brooklyn, footwear retailer Aerosoles secured its first location in the boroughs, leasing a 2,100-square-foot store on Montague Street, and Linens 'n Things leased a 40,000-square-foot site on Cropsey Avenue. Other borough activity includes Kohls taking over two closed K-Mart stores in Fresh Meadows, Queens, and Bensonhurst, Brooklyn, RadioShack continuing to fill voids in the marketplace, and banks responding to new opportunities as they are doing throughout the metropolitan area.

On some of the stronger shopping streets such as Montague Street in Brooklyn, Fordham Road in the Bronx, and Main Street and Roosevelt Avenue in Queens, rents have increased based on limited supply. The quantity of residents and workers, and the revenue they produce, has remained extraordinarily steady--and this has not been lost on national retailers.

The more-than-satisfactory performance of big-box retailers such as Bed Bath & Beyond, Home Depot and Target has demonstrated that rising urban rents are justified by urban traffic. Not surprisingly, Ikea, Loews and Kohls have committed significant resources for new locations throughout the boroughs, and many others are actively looking.