Optimism hits NY retail in time for Christmas.
Everyone knows that the recession has taken a major toll on retailers, but finally, there is some very optimistic news to report in New York's retail market.
First, retail indicators show strong signs of optimism about this Christmas season. In the wake of the recent election and some positive economic indicators, consumers are feeling more positive about the future and starting to shop again. As a result, retailers are far more optimistic about the upcoming holiday season.
For those of us involved in the real estate end of the retail business, New York City -- which has been awash in retail vacancies -- is finally showing signs of improvement. A huge number of foreign and domestic retailers are either entering the New York market for the first time or leasing multiple locations in order to take advantage of one of the best environments for tenants in recent memory.
Many of New York's newest retail tenants are either discounters or better clothing stores, both of which have fared well despite the recession. So far, it is the middle range of the retail market that has been most hurt by the economic downturn.
Bed, Bath & Beyond is just one of many discounters to enter New York's market. In one of the largest recent retail leases, it has opened a cavernous, new store on sixth Avenue between 18th and 19th Street. Other discount retailers have taken advantage of current conditions to lease multiple locations. These include Labels For Less, which has made numerous deals, including its second store on Madison Avenue; Cosmetics Plus, which opened near Lincoln Center, on Third Avenue in the 50s, and in part of the Apple Bank space on Sixth Avenue; and Lechters, Staples and Innovation Luggage, all of which have opened in multiple locations.
Other retailers that have recently leased new locations include Barami on Fifth Avenue and 44th Street; Perugina Chocolate at 520 Madison; Taco Bell, with two new sites on 3rd Avenue; Vitamin Quota on Broadway and 95th Street and in the Union Square area; the record stores Coconuts and Sam Goody; Hallmark, which is leasing a number of new stores; and Chiavari, which has opened a new store on Madison Avenue.
The variety of retailers entering or expanding in the New York City market is indicative of the deep and penetrating changes that have rocked the real estate market. While the recent retail upswing is primarily due to declining rental rates, the combination of reduced rents and a wide array of available retail space has attracted numerous retailers to New York, many of whom are taking advantage of current conditions to lease multiple locations.
For the first time, landlords are now offering major rated retailers longer leases. In the past, a retail tenant could expect a 10-year lease at most; now, leases for 15 years and even longer have become commonplace. In some cases, landlords are open to workletters for major retail tenants and some are offering free rent in lieu of work. At this point, workletters and free rent are generally offered discreetly, depending upon the tenant and the size of the deal.
Much of the upswing in retail activity is due to the reception that the market has finally hit bottom. Despite the continuation of the current recession, there are still retailers that are doing well and are confident enough to sign long leases and expand throughout the city.
Surprisingly, this activity can be seen in almost every Manhattan market above the Financial District, which remains slow. Best of all, the upswing in retail activity proves that New York is still alive and well, and a dynamic place to do business. I believe that we will see a continuing surge of retail activity in the future, which bodes well for this city and its residents.
For myself, 1992 has proven to be a surprisingly active year; for retailers, it means they believe in Santa again.
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|Title Annotation:||rate of retail real estate vacancies shows decrease|
|Publication:||Real Estate Weekly|
|Date:||Dec 2, 1992|
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