Retail rents inch up in response to traffic.

Although shoppers are forsaking high-end designer apparel and flocking to stores like the gap, Manhattan's undiminished tidal wave of consumer traffic continues to support a very strong retail real estate market and presently is pushing space rental numbers upward at a modest, yet steady, rate.

The retail segment's upswing also reflects strong participation by national and local retailers. Store tenants have arrived at the realization that business is on the upswing and rental rates can only move upward.

Especially strong segments include restaurant space and locations for lower-to middle-priced retailers. Retailers in the luxury goods segment are being supplanted by mid-level ones of every product category.

Day after day, shoppers arrive in Manhattan because it is the retailing center of the world. Wealthy Asians, Europeans and South Americans have discovered the low-to mid-range retailers and are flocking to them as well. As I tell my customers: "New York is not the middle of nowhere!"

Another secret of the Manhattan retail success story is that marketplace forces its players to move quickly and adroitly. Opportunities, like parking spaces, are seized very quickly. This results in a quick-paced, "high frequency" marketplace. Experienced players become adept at seeking and finding business opportunities. The market reinforces a fundamental law of economics. The health of the economy depends on the mount of money that is in circulation.

Another optimistic sign for 1993 and beyond is the emergence within the market of national retailers with large space requirements. Again, market dynamics play an important and interesting role. The so-called "category killer" retailer is especially well-suited for the large former bank branches that are available because of consolidation.

Incidentally, the large national chains traditionally shunned Manhattan, preferring instead locations within large suburban malls. Today, the chains are looking to urban locations as a matter of expansion policy.

In conclusion, the retail market is a bright, shining star for New York City's economy. If, indeed, the real estate industry is destined to lead the city out of the economic doldrums, then surely the retail sector will be the catalyst.