Retail market enjoys good health.

As we enter the halfway mark for 1996, Manhattan's retail market is experiencing a major upswing. Though leasing activity can be seen throughout the city, the retail resurgence in the Times Square area is unlike anything that has been seen in recent retail history.

Once a seedy eyesore, Times Square is being transformed into a vibrant 24-hour tourist attraction. Major deals are being completed, rental rates are at record highs, and a host of national and international tenants are flocking to the area.

At this point, the All Star Cafe and Virgin Records have become major tourist attractions. Disney is opening a new store on Seventh Avenue and 42nd Street, a two-story brewery is about to open on 42nd Street, and David Copperfield recently announced that he will be building a "magic" theater. Aside from theme restaurants and mega stores, Times Square has also attracted new retail operations that include The Java Shop and Sun Hut glasses.

As a result of all of this activity, rentals in the area have escalated from $175 to $200 per square foot. Landlords are receiving rents of approximately $125 per square foot on 42nd Street, an unusual situation since tenants are willing to pay these record rental rates despite the fact that the unavailability of basements creates difficulty for most retailers.

Tenants are so eager to be part of the Times Square boom, that Prudential Tower group is leasing space to retailers with cancelable leases in temporary buildings. Other new buildings are slated for construction by developers who want to get in on the action. For example, Durst is planning to construct a new building with Conde Naste as the anchor tenant on 43rd Street and Broadway.

While no other area is experiencing anything like the activity in Times Square, other areas of midtown are active as well.

On Fifth Avenue, The Wiz took space vacated by Wallach's at 555 Fifth Avenue and Disney opened a new store on the comer of 55th Street. Expected openings on Fifth include Salvadore Ferragamo at 52nd Street, and Nike. Warner Bros. is expanding its existing store and a major retail deal is pending at 666 Fifth Avenue.

Sixth Avenue, continues to be very much in demand, especially in Rockefeller Center. However, Herman's is about to give up a major amount of space, and several retail banking operations should be coming on line due to the Chemical/Chase consolidation and plans by Citibank and Fleet Bank to eliminate several locations. Once these vacancies appear, tenants will probably grab the prime retail space, but there will be a large amount of space available.

On Madison Avenue, vacancies are few and far between in the 60s and 70s, but there are numerous vacancies in the 40s and 50s.

On the West Side, there is a huge amount of activity on Broadway and in the Lincoln Center area. New construction in the 70s, 80s and 90s has generated great demand among tenants, though there are some vacancies in these areas.

Further east, there are numerous vacancies on Third Avenue, but space is slowly being absorbed.

Rents have stabilized on 34th Street, but rates have climbed as highs as $125 to $150 per square foot. There continues to be a lot of activity in the area.

Strawberry purchased the former Canadian Fur Store on the Northeast comer of 34th Street and Broadway, and Disney has signed a lease at 33 West 34th Street.

Further downtown, the Ladies Mile area continues to attract major retailers, and the retail market is doing well in the Flat iron District. All of these areas have firmed up, but there are numerous retail vacancies.

The Downtown market continues to be mixed. The World Trade Center is strong, and the vast majority of store space has been rented in the area of Wall Street on Broadway from Fulton to Liberty Street. Vacancy rates are high in such secondary areas as John Street, Nassau Street, Maiden Lane and Fulton Street.

There is, however, a light at the end of the downtown tunnel. As developers transform much of downtown's Class B and C office space into residential buildings, the character of the neighborhood should change. Once buildings such as 25 Broad Street begin to attract residential tenants, the downtown area will become active on a 24-hour basis, created a need for retail services.

At this point, the retail outlook for Manhattan is strong. With many exciting new retailers entering the market, activity should continue for the remainder of the year.

EDWARD A. FRIEDMAN Executive Managing Director Newmark Real Estate Services, Inc.