NORTHEAST SNAPSHOT, APRIL 2011
NEW YORK CITY RETAIL MARKET
Across the country economic indices have revealed a slow, uneven and jobless recovery that in recent months has gained stronger footing. Amidst this recovery, the New York City retail market has shown a marked improvement as well, demonstrated through increasing asking rents and high-profile transactions.
Across Manhattan, current rental rates are trending upward in the city’s prime corridors and stabilizing elsewhere. Headlined by Madison Avenue and Times Square, rents in the New York retail market have escalated or steadied over the last year. SoHo and Tribeca have rebounded after a 2-year dip, while the Meatpacking District continues to assert itself as an emerging corridor. Fifth Avenue from 36th to 42nd streets is emerging as an “affordable chic” market that should see a flurry of activity within the next year.
Demand for avenue space in heavy foot-traffic areas has endured, reflected in high property values and global, name-brand retailers jockeying for real estate. Premier space along Madison Avenue and Fifth Avenue, as well as Times Square, commands upper triple digits to $1,000s per square foot. As we head south, SoHo property values solicit around $500 per square foot, particularly along the Broadway corridor.
Increasing consumer confidence and better economic conditions have strengthened overall demand but not to the extent of 2007 levels. As we analyze figures elsewhere in the city there is an extremely wide value range, with space marketed anywhere from $75 to $450 per square foot.
Reviewing recent transactions, Zara has purchased 32,000 square feet at 666 Fifth Avenue for $400 million (purchase price plus the costs of buying out remaining years on NBA Store lease), in one of the city’s largest retail condominium sales ever. The pricetag alone represents the strong desire for choice Manhattan space, should retailers have the financial capital.
Additionally at 666 Fifth, Uniqlo kickstarted confidence in the retail market with its $300 million purchase of 90,000 square feet a few months prior, signaling the valued impact of a Fifth Avenue location even during uncertain economic times.
Deals are not expected to subside as significant retailers currently scouting for space in New York City include Walmart, Coach, NBA Store and Micro Center. Walmart is exploring location options throughout the city, which could impact both small and midsize stores across a number of industries. Meanwhile, Borders’ recent bankruptcy may return nine New York City locations to the market, potentially offering more options for tenants in the market.
In the meantime, other name-brand retailers have announced moves in their respective real estate portfolios. Lacoste’s flagship store located at 608 Fifth will undergo an expansion and renovation of 10,029 square feet and will open in this summer. In addition, Gap is opening a New York City store for the first time in 7 years with a location in SoHo, cementing the Broadway corridor as desirable area.
Outside of Manhattan, big box retailers have carved out locations and market share in the outer boroughs. In this trend, Represented PA Associates and Simone Development are developing a 300,000-square-foot mall — which would include a Target store — located at 815 Hutchinson River Parkway in the Bronx.
If current activity is any indicator, the retail market will continue to see improvement thanks to greater consumer confidence, high tourism activity, and a healthy macro economy. Continued development and the evolution of certain neighborhoods — such as the Financial District’s ongoing transformation into a 24/7 community — will positively affect the city’s market and bolster it as world-class retail destination.
— Caylor Mark is an analyst with Cassidy Turley’s New York City office.
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