NORTHEAST SNAPSHOT, APRIL 2006
New York City Retail Market
One of the biggest trends recently spreading through the New York City retail market is the arrival of big box retailers, as The Home Depot, Best Buy and Whole Foods are entering the market; all three of these stores have leased space within the last 3 years. Vacancy rates are considered low, although generally, New York City vacancy rates are difficult to establish, especially in the retail sector. Vacant and occupied stores are frequently in play, so to speak. Rental rates vary across the city, differing from neighborhood to neighborhood. For example, asking rents on Fifth and Madison avenues can be as high as $1,000 per square foot, whereas retail space on Broadway south of Canal Street still can fall in the $50-$70 per- square-foot range.
Manhattan always will remain an interest for retailers nationally and internationally, and while the demand ebbs and flows, it remains strong. The most significant development in the New York City retail market since 2001 is the growth of retail submarkets in the other four boroughs. Demand could be a result of people’s desire to stay closer to home after the destruction of the World Trade Center or simply a result of growth in population that has led to new retail construction; regardless, that demand has created the Atlantic Center, development of a new sports stadium, redevelopment plans for the Fulton Mall in downtown Brooklyn and the continual growth of Rego Park in Queens.
Development is flourishing in the Red Hook, Williamsburg and downtown areas of Brooklyn. In addition, there are plans to rejuvenate Flushing Meadow, and Queens Center is one of the most successful retail malls in the country. In Manhattan, the Time Warner Center influenced the construction of the new Zeckendorf project across the street at Broadway and 61st Street as well as the Empire Hotel. As a whole, there is development throughout New York City; other examples include Harlem, the Lower East Side and Long Island City, and the wave finally has spread to South Bronx as well.
In general, if a developer has rights to build mixed-use, it will build retail. Established developers and independent developers are equally active throughout New York City, and many of the new arrivals are groups financed from abroad. Included in that class are Boymelgreen Developers and Elad Group, the latter of which recently purchased the Plaza Hotel. Additionally, established companies and REITs such as Vornado Realty Trust have been active and aggressive, developing properties such as the Alexander’s site and investing in smaller, well-located retail sites in SoHo and on Columbus Avenue.
Aside from Whole Foods, The Home Depot and Best Buy, DSW, Graff Diamonds, Porsche and De Beers also have entered the New York City retail mix. Several of these companies have signed leases recently, including De Beers, which leased ±2,500 square feet, and Porsche, which inked a deal for $1,200 per square foot at 620 Madison Avenue in the GM building. Further, The Home Depot and Best Buy both leased spaces of approximately 35,000 square feet located on West 23rd Street between Fifth and Sixth avenues for between $45 and $55 per square foot.
Looking toward the future, lower Broadway and Wall Street in Manhattan are showing growth potential and have affordable rents. With planned residential projects that began 2 or 3 years ago nearing completion, the neighborhoods are changing rapidly, and the demand for housing continues to be strong. When the new residential developments are occupied, demand for retail and services will soar.
— Christine Emery is senior managing director at The Lansco Corporation/ CORFAC International in New York City.
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