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Retail report: gloomy year with some bright spots.

In Manhattan alone, job losses over the last two years have wiped out all of the private sector growth that occurred in the 1980's.

As a result of the worst recession in recent memory, retail rents have declined in both primary and secondary markets. Bankruptcies have become a weekly occurrence and "for rent" signs are appearing with ever increasing frequency.

This is especially apparent in Manhattan's downtown market. The Wall Street area has been particularly affected, experiencing rent erosion in the prime retail areas of Nassau Street and Broadway.

As a result of increased real estate taxes, insurance, water rates and the general cost of doing business, many retailers have approached their landlords for rent relief. In cases where rent and other financial burdens have pushed retailers to the point of bankruptcy,

Retailers struggled through yet another disappointing year in 1991, culminating with a dismal Christmas season.

Expectations for an economic rebound after the Gulf war were foiled as consumers tried to reduce high debt loads and restrain spending.

As a whole, the nation is suffering from ill-conceived mergers, rampant speculation, over-building, heavy borrowing and the legacy of 1980s irresponsible government spending. Not only are businesses, banks and consumers cutting back, so are numerous industries that overexpanded in the 1980s, often in response to high consumer spending. Industrial giants that have announced major cutbacks include General Motors, which is closing 21 plants in the United States and Canada to eliminate 70,000 jobs, and IBM, which will eliminate 20,000 jobs.

The New York metropolitan area has lost more than 400,000 jobs since 1989. many landlords have been forced to absorb rent and other costs; the result is eroding profits and increased losses. This is a major problem for both landlords and retailers, and there is no end in sight.

There are, however, some positive notes. Many local retailers are expanding. Some of them include Hermans Sporting Goods, Duane Reade Drug Stores, British American, which now has two men's stores on Madison Avenue, SiXth Avenue electronics, Ann Taylor and Nat Sherman. Major national chains entering the New York market or expanding their presence include The Gap, men's outerwear retailer Eddie Bauer, the housewares specialist Williams Sonoma, and Searle, a ladieswear chain.

A number of foreign retailers have also recently entered the New York market. They include Escada, which sells high fashion ladieswear; Tina Cosma, a purveyor of fine Italian neckwear; Arlene Stuen, which sells Scandinavian clothing, antiques and art; Fila Sports, which sells upscale sportswear; and German leathergoods specialist Goldspiel.

Many of these tenants were attracted to New York because of lower rental rates that were caused by the recession and the soft market, as well as the availability of desirable and previously unavailable locations. In many cases, these retailers have been able to negotiate longer leases and favorable rent terms, including rent concessions and, in some cases, workletters that are performed by the landlord on the tenant's behalf.

Though 1991 was tough on retailer, I do not foresee improvements in 1992; in some cases, things will get worse. Even if the government's programs to stimulate the economy succeed, it will take time for retailers to feel the impact. While a turnaround in 1992 looks unlikely, I hope that we will start emerging from the recession in 1993.

 Rental Range
 Locations $ per sq. ft

Lower Manhattan
 Broadway $ 75 - $ 90
 Nassau Street $ 65 - $100

Fifth Avenue
 34-42nd $ 70 - $100
 42-50th $ 90 - $150
 51-59th $300 - $500

Madison Avenue
 42-50th $ 90 - $150
 51-60th $100 - $175
 61-72nd $150 - $250

Lexington Avenue
 42-57th $ 85 - $125
 57-61st $100 - $150

Third Avenue
 42-57th $ 75 - $100
 57-61st $ 90 - $125


72-96th $ 60 - $ 90


67-96th $ 65 - $100
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:retail rents
Publication:Real Estate Weekly
Date:Feb 19, 1992
Previous Article:Promenade announces high occupancy at Midtown buildings.
Next Article:Riverbank arranges sublease at 16 E. 34th.

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