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SoHo retail market strong again.

Demand for prime retail space in the SoHo area of Manhattan exceeds supply and, as a result, the retail corridors in SoHo are thriving and strong once again. Renting has been so intense that there is some concern about the market overheating.

Rental rates in SoHo are significantly higher today than a year ago for well-located stores. Vacancies are hard to find because the market is so tight, and even secondary locations are beginning to attract better tenants. Retailers today are taking locations they would not have considered a short while ago. And not only are new stores coming in, but existing ones are expanding as well.

There also has been a shift of the area's retail epicenter from West Broadway to Prince Street at the intersection of Broadway.

The SoHo retail market has been climbing out of a recession during the past few years and, during the process, a number of important positive changes have helped to transform the area's image. These include the opening in 1992 of the "Guggenheim Museum SoHo" at 575 Broadway at the avenue's intersection with Prince Street. In addition, the luxury, 69-room Mercer Hotel is being developed at Prince and Mercer Streets, a block from the Guggenheim.

The museum and the emerging hotel are providing firm anchors for the strong neighborhood retail leasing market, and, in particular, for Prince Street's retail strength. All of these developments -- including the existing tenancies of Dean & DeLuca and Armani AX, the museum and the hotel-mean enhanced traffic and more business.

West Broadway for many years has been the dynamic SoHo retail hub. But today the area's premier retail thoroughfare is Prince Street, extending from Sullivan Street to Broadway. In addition, even sections of Spring, Wooster and Greene Streets are being counted as prime locations.

The geographical boundaries of SoHo can not, of course, be stretched, but in practical terms and because of the tightness of prime retail space available for lease, demand is rising for stores in other than the traditional shopping streets in the area. This includes store properties on Mercer and Grand Streets, which are now rapidly increasing in popularity.

The character of the SoHo retail market certainly is not what it was five years ago when it was dominated by art galleries and trendy restaurants. Many of these businesses were badly hurt by the recession. Those restaurants dependent on attracting out-of-area customers suffered, and a large number of art galleries closed their doors. Today, however, these art galleries are coming back, but the majority have sought more economical quarters on the upper floors of loft buildings.

When family life turned inward under the impact of the recession, those businesses which catered to a home-oriented life-style saw an upturn in activity which then led to an enormous increase in furniture and home furnishings stores opening in the area. Mainstream apparel boutiques, also recognizing the appeal of SoHo, are coming into the area as well and are, in some instances, replacing the avant-garde clothing retailers that previously had dominated the scene.

Among the new SoHo retail leases are several that New Spectrum recently brokered. These include Country Roads Australia, a men's and women's apparel store on West Broadway; the Nature Company, the Berkeley, California-based retailer of nature-oriented products on Broadway at the corner of Prince Street; Tootsie Plohound, which in the fall will open a high-style shoe store on West Broadway; Poltrona Frau, an exclusive Italian furniture company, which has opened on Wooster Street; and the Tony Schaffazi Gallery, also on Wooster Street.

Unlike uptown retail areas supported by surrounding apartment communities and which potentially have at least six-days a week to do business, most SoHo retailers depend on weekend shoppers for a substantial part of their sales. This, of course, means that their sales are more sensitive to weekend weather conditions than similar stores located on, say, upper Madison Avenue.

This is one of the reasons why I believe retailers should be encouraged to approach this market with an appropriate amount of caution as well as enthusiasm. It is the latter, though, that explains why rental rates in SoHo, which were depressed as recently as two years ago, are now in the range of $100 a square foot for Prince Street stores. Spring Street stores are achieving $60 to $75 per square foot, and Wooster Street space is renting for $40-$45 a square foot.

These still are viable rents, but I would not like to see a repetition of the boom-and-bust pattern of prior years. This would not benefit the retailer, the property owners or the neighborhood.
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Mid-Year Review & Forecast, Section I; Manhattan, New York, New York retail leasing industry
Author:Banker, Caroline P.
Publication:Real Estate Weekly
Article Type:Column
Date:Jun 23, 1993
Words:762
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