Manhattan market is ground zero for retailers.
The City showcases some of the most diverse and most exclusive shopping districts in the world, and while each neighborhood has its own characteristic flair, one thing is certain: from Battery Park to Central Park, Manhattan retail space is hot.
The lower third of Manhattan, dubbed New Amsterdam by the Dutch, is the oldest part of the City and is famous for its rich history. Battery Park and the Statute of Liberty, Wall Street and the New York Stock Exchange, the Twin Towers an the World Financial Center, all draw tens of thousands of tourists and commuters daily, ore importantly, what was once strictly a nine-to-five environment is now a neighborhood of more than 20,000 residents, with a projected addition of another 10,000 residential units by the year 2002. Needless to say, the demand for retail space to provide goods and services for all these potential shoppers has increased dramatically.
Consider the Financial District/Wall Street area. At the Broadway-Nassau Street mall one can find anything from shoe stores to jewelry boutiques, beauty salons to book sellers, and music emporiums to golf outlets. Century 21 and Sym's department stores both have found homes here, and the South Street Seaport, with it s collection of shops, is nearby. In this area, rent runs from $40 to $150 per square-foot.
This contrasts with the more traditional look of the mall at the World Trade Center. Found within a complex of seven buildings, including the twin 110-story towers, the World Trade Center is home more than 350 companies, retail outlets and restaurants. It's no surprise that this institution experiences average daily traffic of more than 140,000 employees and visitors. To support such activity, stores like Banana Republic, The Gap, Godiva, Borders Books, J. Crew and more give this property the comforting look and feel of any other mall America.
Similarly, the World Financial Center, with 8 million square feet of space on 14 acres, supports approximately 39,000 workers and nearly 30,000 additional visitors. When the adjacent Battery Park City is completed, these ranks will grow by 25,000 residents. To accommodate such activity, there are some 31 retailers and 17 restaurants. The average rent at both the WTC and the WFC is $75 per square-foot.
SoHo: International Sophistication
Even in this city of change, the evolution of the area between Canal and Houston streets has been rapid and remarkable. Once a historic packing and warehouse district, artists began to flock here in the late 1960's for SoHo's affordable rents and avant-garde culture. The open, airy spaces with their dramatic facades and flexible architectural styling proved to be ideal for the many galleries and trendy eateries that soon sprouted and thrived. As the area's popularity spread, SoHo soon attracted the creative and the curious from around the block and from around the world. In short time, SoHo developed a nonstop appeal, with its markedly international flavor and its eclectic mix of galleries and agencies, boutiques and bars, spas and clubs.
It's no wonder that designer houses like Armani, Commes des Garcons, Anna Sui and Todd Oldham set up shops in SoHo, and it wasn't long before other Fifth-and-Madison shops followed. Today, SoHo has expanded well beyond its original confines, and its swarming demographics have attracted much larger, national retailers such as J. Crew and Victoria's Secret. The overwhelming demand for diminishing space has driven up the cost of real estate and driven away the "traditional" SoHo resident. Rents range between $65 and $225 per square foot and are often beyond the reach of small boutique aspirants. SoHo building owners now get to pick and choose between prospective tenants. As a result, many in the artist community have moved their galleries north to Chelsea, while small retailers are exploring the up and coming area north of Little Italy, or NoLIta.
The amalgam of neighborhoods between Houston and 34th streets has also seen a resurgence that lives up to its past. From the time Macy's was born on 14th Street to the incursion of big boxes like Old Navy, Barnes & Noble, ABC Carpet, bebe and Emporio Armani, retail has been vital to this area. Like the rest of Manhattan, individual districts have unique characteristics: compare Greenwich Village with its youthful beat to Chelsea, swelling with SoHo expatriates, or the Flatiron/Union Square area and its Silicon Alley growth, to the Herald Square area, home to Macy's flagship store and Manhattan Mall.
Along Sixth Avenue's Ladies Mile, the blocks of large properties with development potential have already attracted the likes of Filene's Basement and Bed Bath & Beyond, and the trend seems unabated. In fact, the growth in easily accessible shopping has inspired the development of newer residential units and is a draw for prospective employers. Currently, a tenant can expect to pay in the range of $100 to $150 per square foot.
North Toward 42nd Street/Times Square
While most people are aware of how rents have steadily increased, only the observant will notice the shift in who is developing retail sites and where. The main factors in this shift include the general improvement in the economy, the increased influx of tourism, and improvement in the quality of life throughout the City. As a result, developers are adapting and repositioning spaces in and around Midtown's main transportation terminals: Penn Station, the Port Authority and Grand Central Station.
Penn Station, nestled between the Flower District in the south and the Fashion Center to the north, has become Senator Patrick Moynihan's pet project and will expand to include part of the Main Post Office on Eighth Avenue. Currently, it supports a K-Mart and smaller retailers that feature quick pick-up items, but if development plans come to fruition, retail potential should surge. Rents in the neighboring Fashion Center area range from $80 to $150 per square foot, and in Times Square, from $125 to $300 per square foot. Similarly, Grand Central Station, one of the world's most famous train stations, is nearing the end of a $175 million restoration and has attracted a number of upscale retailers like J. Peterman, Kenneth Cole and Banana Republic. Within and around the terminal, one can expect to pay from $75 to $250 per square foot, plus a percentage rent.
The Jewels of Midtown
Perhaps the biggest retail demographic shifts can be seen in the most traditional of shopping areas. The area surrounding the corner of Fifth Avenue and 57th Street has long provided some of the most exclusive shopping in the world. With Central Park, Rockefeller Center, St. Patrick's Cathedral, and the Trump properties nearby, it's location is a nexus for international business and leisure travel. Bergdorf Goodman is on Fifth Avenue and so is Saks. FAO Schwartz made sure that their relocation kept them in the area, and Warner Brothers opened a multi-floor store on the northeast corner of Fifth and 57th.
In some ways, the growth and success of Fifth Avenue has dampened its cachet. Eager to feature showcases with stalwarts like Tiffany, the mega-stores of corporations like Warner Brothers, Nike and Disney instead gave it the feel of a middle America mall. In response, high-end luxury retailers, mostly international houses, distanced themselves by seeking space north and east along the adjacent Madison Avenue. Today, the strip of Madison Avenue from 57th to 72nd features some of the most exclusive boutiques, more than willing to pay rents that float in the range from $400 to $600 per square-foot. At these prices, Madison Avenue nudges out Hong Kong's Causeway Bay for the honor as the world's highest-rent retail zone.
If one is the type that can purchase without justifying the price of any particular item, then one can indulge in Gianni Versace, Barney's, Tourneau, Baccarat and more. In spite of the exorbitant prices for these luxuries, many of these properties are loss leaders and are viewed as necessary advertising and marketing expenses.
Regardless of the neighborhood, Manhattan continues to show tremendous growth potential for retailers. While no longer the $24 steal that the Dutch purportedly bargained, the continued strength in the economy and tourism make Manhattan a desirable market for any retailer. As long as the retailer is aware of neighborhood identities and target demographics, success can be made here.
|Printer friendly Cite/link Email Feedback|
|Publication:||Real Estate Weekly|
|Date:||Nov 17, 1999|
|Previous Article:||Madison Avenue retail corridor is expanding.|
|Next Article:||E-commerce complements brick and mortar retailers.|