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Excess space overshadows retail activity in New York.

Excess space overshadows retail activity in New York

Despite current economic conditions and published-reports of major retailers in financial distress, the New York metropolitan region's retail space market is enjoying a healthy amount of leasing activity.

However, the amount of successfully completed lease transactions is overshadowed by the market's huge supply of available space, and it is unlikely that the rate of absorption will show dramatic improvement in the near future.

For example, our firm concluded more than 600 store lease transactions in 1991 - a successful annual record by any measure. Yet, at the outset of 1992 our computerized data base shows that approximately 3,000 stores are available for lease in the metropolitan area.

Two major retailing forces presently are generating activity in the market. The large American chain store operators have returned to New York City to look for store locations. European retailers, who are now preparing in great numbers to take advantage of traditionally strong middle class shopping population, are also in the market for space.

In a counter-trend that presages even greater growth for American retailers, chain stores now are looking for opportunities in Europe. Next year's unification of the Common Market nations will open a market populated by 325 million people. There is tremendous growth potential for American retailers, restaurateurs and retail service businesses in Europe.

History shows that U.S. retailers have a "manifest destiny" to expand their operations. The chains are publicly-held companies that are listed on the stock exchanges. They must expand in order to survive.

Until recently, however, their growth throughout the United States has been within regional shopping malls. Today, U.S.-based growth has slowed exponentially. Now the chains are looking to Europe, where fallen trade barriers will facilitate the flow of goods.

The Limited, for example, may open thousands of new retail outlets in Europe. The Gap may open thousands of stores, as well. Retailing indeed has become a global concept, unrestrained by national borders.

Our firm's practice in Europe concentrates, at present, on markets in Great Britain, France, Germany, Spain and Italy. Based on five years of doing business in Europe, we have found that European retailers are more interested than ever before in New York City. New York's high figures for shopper traffic, plus the downward pressure on rents, are attracting the tenants.

In conclusion, recent lease transactions in New York City reflect the growing interest and activity here on the part of both U.S. and European retailers. At the same time, the European market is poised for explosive retail growth next year.
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Review & Forecast Section III
Author:Aug, Charles
Publication:Real Estate Weekly
Date:Jan 29, 1992
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