Watching West 8th Street rise from ashes.

If you've read any of the recent articles about West 8th Street between Fifth and Sixth Avenues, you probably think that the block has gone up in flames.

These days, people heralding the death of West 8th Street are a dime a dozen, but a few savvy investors are seeing the glimmers of life quietly ushering in a new era for the block. As of July 25, 2006, the block was lined with a disheartening 17 vacant storefronts and the street resembles something of a retail ghost town.

Longtime property owners in the neighborhood remember a time years ago when West 8th Street was a place to shop for items beyond discount leather. During the mid-19th century, the strip housed a variety of properties from candle retailers to the original site of the Whitney Museum of Art at 8 West 8th Street (now the New York Studio School).

After the transition into its leather goods stage over the last decade, it picked up an uncomfortable stigma of housing second-class retail. Over the next several years, that stigma will likely disappear as new uses find their way to the block.

A main reason for this is that, like Christopher Street or St. Mark's Place, 8th Street is not only the main pedestrian thoroughfare between two avenues, but also has access to subways and is only a block from Washington Square Park. Moreover, the buildings are mixed-use properties with very strong retail exposure. As if that were not enough, the block sits in New York University's lap, waiting for the Village's largest presence to send its 50,000 students, professors, and staff shopping.

In the last several months, at least three record level leases have signed on the block for about $100 per square foot. These include IS Wine; an experienced restaurateur that has signed a lease at number 47; and Pio Maya, another restaurant, that has signed a lease at 40 West 8th Street. In addition, a Belgian waffle restaurant and a small tea shop are looking on the block. Barnes and Noble sits on the Sixth Avenue corner, while the upscale dell, Le Pain Quotidienm, is on the Fifth Avenue corner. Only a block away, Chipotle and Starbucks have moved in.

All of these facts mean nothing, however, if the block's landlords are not in support of change for the area. Luckily in this case, they are. Buchbinder & Warren, who led a similar transformation on 14th Street through the 14th Street Business Improvement District, own several buildings on the south side of the block and are committed to improving the quality of tenants.

The situation is similar with Friedland Properties, which controls almost 220 feet of retail frontage on the block.

Five buildings on the block have changed hands in the last two years and numbers 45 and 47 are currently on the market. The change from old, long-term ownership to new ownership is a breath of fresh air, as most of these newcomers are actively pursuing revitalized retail with better quality or credit tenants. In addition, the Eighth Street BID recently retained a consultant who will help identify strategies to revitalize the block.

Of the properties on the block that sold recently, Massey Knakal handled two of them. 11-15 West 8th Street sold in 2005 for $14,500,000. The property is a six-story elevatored building with 74' of retail frontage, representing a 3.5% cap rate, 15.5 times the rent or $468 per square foot. Meanwhile, 21 & 23-25 West 8th Street consist of two walk-ups with 75' of retail frontage. As a large portion of its potential gross rent was derived from the vacant retail, the properties sold for $11,300,000, representing a projected 6.6% cap rate--11.1 times the rent, or $345 per square foot.

Massey Knakal is currently marketing 45 & 47 West 8th Street with an asking price of $7,900,000. At that level, a buyer could control 46' of frontage on this up-and-coming block for a projected 6.6% cap or 12.32 times the rent. Many investors are hesitant about the block given its tarnished reputation, but given the average 5% cap rate of the buildings Massey Knakal recently sold, it is clear that some investors bid aggressively for an opportunity there.

Having seen the revitalization of St. Mark's Place and 14th Street, it appears inevitable that 8th Street will become the latest success in a string of retail revitalizations. While some may say the sky is falling, it seems much more likely that not only is this a story of false alarm, but that things on the block are about to get dramatically better.

BY JAMES NELSON, MANAGING PARTNER, AND BRENDAN GOTCH, ASSOCIATE, MASSEY KNAKAL REALTY