Retail market still strong despite economic slowdown.

I am asked on a daily basis, what is happening in Manhattan's retail leasing market? The market certainly enjoyed a strong performance in 2000, with increased interest from both national and international retailers driving rents higher and vacancies lower. However, considering the recent abundance of "doom and gloom" forecasts for the national economy in light of poor year-end sales; the stock market's nosedive; the bankruptcy filings of a number of retailers; poor corporate earnings and layoffs and a bevy of dotcom failures, the forecast for the retail market is harder to predict.

An agent/owner in the Flatiron/SoHo area was complaining this morning about 100,000 square feet of office space dumped on her in the last month. I asked her about the retail space in her building. According to her, the market for retail space has been unaffected, not even a bleep on the screen.

I am finding that this is the case in most of Manhattan's major retail areas. The prime submarkets, such as Madison, 57th Street, Fifth, SoHo, Flatiron, the Upper West Side and Upper East Side seem to be unaffected. The luxury retailers still have a big appetite for retail space in high-traffic areas and rents remain strong.

Not only have the traditional retail markets been doing well, there are new hot markets emerging such as the Garment Center where new office space is spurring retail on the ground floor. And, as Times Square continues to expand geographically, retailers are also expanding into unconventional space. They hope to build on the energy of the revitalized Times Square and the millions of tourists that flock to the area each year. The Meat Packing district, TriBeCa and Chelsea areas are also getting attention from retailers looking for an artsy environment. 34th Street is a market unto itself; and the Union Square-l4th Street area has been revitalized for a yuppie consumer. In addition to the shopping districts, retail is spreading to the submarkets. What was considered fringe yesterday is central today for many retailers.

Demand for retail space is coming not only from retailers already here looking to expand, but from many that have not yet established a presence in Manhattan. During 2000, many new retail names graced the city, including several national retailers and some from Europe, such as H&M.

What will happen in six months is hard to predict, but with market fundamentals as they stand today, the leasing market for retail space in Manhattan is likely to remain relatively healthy throughout 2001.