Retail leasing in '95 was good; '96 will be better.

In 1995, the retail leasing market benefited greatly from an overall resurgence in the real estate market in New York City. We saw construction begin on exciting new projects; a commitment by City and State government to development and redevelopment; and decisions by major companies to stay, and even move into, Manhattan.

For the first time in years, there is a genuine need to construct more residential and commercial space - and with that need follows a logical demand for more retail space.

In 1995, national retainers opened several new stores. With so much space coming off the market, rents have risen at least 10 to 12 percent city-wide, and the market has tightened considerably.

Nowhere is the growth trend more evident than Downtown. The Mayor's plan for residential conversion and tax and energy abatements for Lower Manhattan has made this hot retail market even hotter. In fact, we believe Downtown Manhattan represents tremendous untapped sales potential for all types of retailers, including "big box" chains which are actively searching for new store locations throughout the city.

Other facts about Downtown's potential include:

* Potential downtown retail demand is 72 percent higher than the existing supply of retail space in Lower Manhattan.

* Currently, unsatisfied demand from Downtown workers, visitors, and residents combined would support 1.5 million square feet of additional retail space.

* Interviews with several prominent Downtown merchants revealed sales to be "good" to "excellent" by 69 percent of those surveyed.

* Total Downtown spending potential is estimated at $4.2 billion per year.

* Average store rent levels in downtown are 58 percent below typical Midtown rates, making the Financial District a relative bargain by New York City standards.

In short, the future of retailing in Lower Manhattan looks very positive. For 1996, we believe the growing interest of leading chains in this "under-stored" area will result in a wave of new store openings in Downtown over the next 18 months.

Retail leasing also was brisk in other areas of Manhattan, including Lower Broadway, Union Square, the Upper East Side and the Upper West Side.

Look for the successes of 1995 to carry over into what should be a banner year for retail leasing in 1996. Watch for the following to develop:

* Value retailing will grow; consumers are willing to spend money but want good products at the right price.

* More stores that focus on the home and home improvement will open (i.e. Bed, Bath & Beyond, Home Depot, etc.)

* Space that is currently considered below grade will be renovated and occupied.

* After Chemical and Chase merge, a great deal of retail space will become available in the second quarter of 1996.

* Rents will climb.

* Absorption will reach lofty heights.

* Secondary markets will grow because of overflow from the main corridors.

* Growth of non-apparel stores will occur.

* Demand for large spaces will continue.

* Confident consumers will start spending again.

* Foreign retailers will continue to search for space in Manhattan.

* Retailers who target the luxury market and high-end consumers will continue to do well.

The revitalization of New York City, growing consumer confidence and a recovering real estate market all point to a great year in 1996. Good luck and Happy New Year.

(Garrick-Aug's Faith Hope Consolo can now be seen on the Internet, including the popular retail column, "The Faith Report," and listings with color photographs of storefronts and recent news articles on the retail market. Her home page is http:www.nyrealty.com:80/retail/garrick.html. Her e-mail address is [e-mail].)