Manhattan Retail Market

Manhattan Retail Market
M I D - 4 TH Q U A R T E R 2 0 1 5 R E P O R T
SoHo Rents May be Reaching a Plateau
The popular retail corridor that boasts some of the finest retail is also reportedly riddled with a high number of vacant storefronts within
the area roughly bound by Houston- and Canal Streets to the north and south; and Broadway and Thompson Street to the east and west.
While the allure of the neighborhood’s large volume of international and luxury tourism continues to attract interest, rising rents are
surpassing figures that can be justified based upon sales according to some sources. But without the pressure to fill vacancies for income
that residential co-ops require many SoHo landlords — some of them speculative buyers, are reportedly willing to ride out the vacancy
to obtain the higher prices.
Yet despite the lack of profitability for some, deals have been made at record prices —
particularly for the coveted corner spaces that maximize exposure with wraparound frontage
adjacent to a major subway entrance. The record-breaking renewal signed by Italian fashion
house Prada in 2013 for a reported $1,025 per square foot represented the first 4-digit deal
south of Midtown. The 25,000-square-foot ground level space at 575 Broadway is located
at the corner of Prince Street. More recently, athletic footwear retailer Nike has reportedly
committed to a $1,200 per square foot lease at 529 Broadway that reportedly equates to
a total annual net rent price of $16 million. The 5-story retail development currently under
construction at the corner of Spring Street has less than 10,000 square feet of ground
level space. However some industry experts point out that these deals are atypical, further
noting that the days of 4-digit signings have past.
Sources:
http://ny.racked.com/2013/4/15/7677191/prada-will-stay-in-soho-agreeing-to-record-breaking-rent
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Retail Vacancy Swells Along the Lower Corridor of Midtown’s 5th Avenue
According to some industry sources, although the upper end of Midtown’s 5th Avenue’s retail corridor continues to maintain a solid roster
of luxury brands and low vacancy, the 8-block strip below Saks Fifth Avenue’s 49th Street store reveals a very different picture.
Leasing activity above 48th Street has reportedly been able to fill larger vacancies along the corridor. Some notable deals include the
Victoria’s Secret lease for 64,000 square feet vacated by H&M at 640 Fifth Avenue; high-end jeweler Wempe is expanding into space
vacated by Swarovski and Lindt chocolates at 665 Fifth Avenue; Microsoft will be opening the company’s first Manhattan Flagship at 677
Fifth Avenue. While a few large blocks remain vacant, it is proportionately less significant in comparison to the stretch between 42nd and
48th Streets where several available large blocks of retail space have pushed vacancy figures higher.
Large Retail Vacancy Above 48th Street*
Address
Sq. Ftge. Location
Former Tenant
650 Fifth Avenue
25,695 SF SWC 52nd Street
Juicy Couture
604 Fifth Avenue
21,000 SF West 48-49th Street
TGI Fridays
597 Fifth Avenue
18,500 SF NEC East 48th Street
630 Fifth Avenue
21,336 SF West 50th-51st Streets
685 Fifth Avenue
25,490 SF SEC East 54th Street
Total:
112,021 SF
Large Retail Vacancy Between 42nd and 48th Streets*
Address
Sq. Ftge.
Location
530 Fifth Avenue
35,000 SF West 44th-45th Streets
535-545 Fifth Avenue
82,000 SF East 44th-45th Streets
576 Fifth Avenue
10,000 SF SWC West 47th Street
Former Tenant
Jewelers on Fifth
590 Fifth Avenue
22,200 SF West 47th-48th Streets
National Basketball Association
510 Fifth Avenue
31,405 SF SWC East 43rd Street
Joe Fresh
520 Fifth Avenue
77,000 SF West 43rd-44th Streets
Proposed (June 2017 possession)
522 Fifth Avenue
23,987 SF SWC West 44th Street
564 Fifth Avenue
20,500 SF West 46th-47th Streets
565 Fifth Avenue
31,685 SF NEC East 46th Streets
597 Fifth Avenue
18,150 SF NEC East 48th Street
Total:
Build-a-Bear, Redken
351,927 SF
*Square footages are approximate
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Upper West Side’s Columbus Avenue Retail Vacancies Surge
The 15-block stretch along the Columbus Avenue retail corridor spanning blocks West 67th Street to West 82nd Streets has a total of 185
retail spaces; and has seen a surge in retail storefront availabilities. The current 15 block-front vacancies recently mapped by the Columbus
Avenue Business Improvement District which oversees the area represents a significant rise in vacancy since the zero-figure just 3-years
ago. Some tenants such as Amber New York City Restaurant Group’s Amber Sushi reportedly remained in the vicinity, relocating to a smaller
and cheaper side-street location at 103 West 70th Street. Amber NYC also opened a Japanese table-stop barbecue eatery at 100 West 82nd
Street, replacing seafood eatery Ditch Plains that vacated the space which became too rent prohibitive to justify remaining.
Some sources note that a dichotomy between tenant and landlord expectations accounts for the recent swell of vacant storefronts as
news of surging prices in certain retail corridors prompts some landlords to increase asking rents beyond what area can support. Other’s
feel that the failing of some retailers is due to a lack of creativity in their merchandise offerings that ultimately result in store closures.
According the Spring 2015 statistics released by the Real Estate Board of New York (REBNY), asking rents for available ground level space
along the Columbus Avenue corridor between West 66th and 79th Street averaged $447 per square foot with a range of $300-$600 per
square foot, in comparison to $360 per square foot year-over-year with a range of $226-$650 per square foot.
452 Columbus Avenue
1,211 SF GF
850 SF BSMT
'PSNFS5FOBOU
4QPU
*OEVTUSZ%PIH%BZDBSF
Retail Opportunities - Fall 2015
W.81st Street
424 Columbus Avenue
2,600 SF GF
2,600 SF 2FL
2,600 SF BSMT
W.81st Street
W.80th Street
W.79th Street
416 Columbus Avenue
750 SF
W.77th Street
W.76th Street
W.75th Street
102 W.79th Street
W.74th Street
W.73rd Street
330 Columbus Avenue
1,450 SF
American
Museum
of Natural
History
W.77th Street
W.76th Street
W.74th Street
305 Columbus Avenue
1,114 SF GF
615 SF BSMT
273 Columbus Avenue
1,000 SF GF
1,000 SF BSMT
W.73rd Street
W.72nd Street
W.71st Street
W.71st Street
W.70th Street
W.70th Street
W.69th Street
265 Columbus Avenue
900 SF
247 Columbus Avenue
910 SF GF
600 SF BSMT
W.68th Street
ay
dw
oa
W.69th Street
313 Columbus Avenue
1,000 SF
W.75th Street
W.72nd Street
Br
324 Columbus Avenue
1,096 SF
'PSNFS5FOBOU
5IJOL$MPTFU
*OEVTUSZ$MPUIJOH
Columbus Avenue
W.78th Street
329 Columbus Avenue
2,272 SF GF
943 SF MEZZ
2,009 SF BSMT
322 Columbus Avenue
1,275 SF GF
750 SF BSMT
'PSNFS5FOBOU
1PPLJF4FCBTUJBO
*OEVTUSZ$MPUIJOH
Sources:
188 Columbus Avenue
848 SF GF
310 SF BSMT
'PSNFS5FOBOU
8JOL
*OEVTUSZ$MPUIJOH
http://www.columbusavenuebid.org/pdf/Fall-2015-Columbus-Avenue-Retail-Vacancies.pdf
221 Columbus Avenue
3,530 SF GF
685 SF BSMT
'PSNFS5FOBOU
"NCFS4VTIJ
*OEVTUSZ3FTUBVSBOU
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Signs of Retail Rent Prices Peaking Begin to Surface
Some landlords have begun responding to the intensifying push-back by retailers of the surging rent prices, giving rise to implications that
retail rents may have finally reached an apex. According to some sources, landlords have begun reducing asking prices even before the
10-15% cuts that typically occur during negotiations. It has also been suggested that the looming rise in interest rates and the unsettled
economic situation worldwide which has resulted in a recent slowdown of European retailer activity, have further triggered a downward
shifting in asking rents. However it has been further noted that the developing trend may be isolated to certain retail corridors where supply
has exceeded demand, landlords using the price reduction as a marketing tool to help make their space standout within the crowd.
Neighborhoods such as Harlem’s burgeoning 125th Street corridor have seen recent spikes in asking rents reportedly based upon the
expectations of future big-box retail currently under construction. Once delivered the arrival of companies such as Whole Foods and Bed
Bath & Beyond will significantly transform the neighborhood, but current escalated rents may be premature for what the retail market can
handle based upon current sales volume.
Some reported examples include:
•
664 Sixth Avenue (Chelsea) – The 1,400-square-foot space located on the 2nd floor of the 4-story walk-up was reduced $1,000 from
$8,750 per month representing a discounted per square foot figure of roughly $66.43 per square foot versus $75 per square foot.
•
100 Hudson Street (TriBeCa) – The 2,084-square-foot space located at the corner of Franklin Street was reduced to $150 per square
foot ($312,600 annually) from $175 per square foot ($364,700 annually).
Main Greenwich Village Artery Offers Viable Retail Corridor
The somewhat lesser renowned corridor of 8th Street in Greenwich Village reportedly makes an affordable location for entrepreneurial retail
businesses, offering more moderate asking rents comparatively to other more well-known corridors. Asking rents along the neighborhood’s
main artery that stretches from Broadway to 6th Avenue reportedly average $143 per square foot. Efforts by the Village Alliance, the BID that
oversees the 44-block district, has brought about a more balanced mix of retailers that take advantage of some impressive neighborhood
demographics. New York University, Cooper Union, the New School, and Cardozo Law located within Greenwich Village attract over 50,000
students to the area with an estimated discretionary spending budget of between $600 and $1,100. In addition to substantial foot traffic,
the district boasts:
•
90,000 Office workers employed in local businesses;
•
27.3 Million subway riders that pass through the West 4th Street, Astor Place, 8th Street, and Christopher Street stations;
•
65,000 Residents with an average household income of nearly $112,000 per year.
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Retail Activity In The News
Airbnb to Partner with Brooklyn Chamber of Commerce
The controversial room-sharing service is partnering with the Brooklyn Chamber of Commerce in a joint effort to encourage its users to
spend their money at businesses within the vicinity of where they are staying. Brooklyn, which has become the top destination for the
hundreds of thousands of Airbnb guests that reportedly pass through the borough each year, offered the ideal location for the startup to
establish its test site. The borough accounted for nearly 1/3rd of Airbnb visitors that were hosted in New York as their primary location, while
close to 50% paid a visit to Brooklyn during their trip.
The pilot program will bring Airbnb hosts together with small business owners through a collaborative effort to devise strategies to support
each other’s businesses. In addition the startup is also hoping to improve its image in New York where it has not always been welcome,
incurring the strongest resistance from the city’s hotel union. If the program is successful, Airbnb plans to expand it to other cities across
the globe.
The Brooklyn chamber will be providing the funding to hire a “neighborhood outreach organizer” who will serve as a liaison between Airbnb
hosts and surrounding businesses; while Airbnb will sponsor the chamber’s “Explore Brooklyn” tourism site, and will donate $15,000 as
required to serve as a “champion” level member of the chamber organization.
Efforts will be made to attract tourists to some of the less-traveled neighborhoods such as Bedford-Stuyvesant, Crown Heights, Bay Ridge,
and Dyker Heights.
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Retail Activity In The News (cont’d)
Lowe’s Utilizes High-Tech for New Manhattan Stores
The home improvement chain which made its debut this year in Manhattan with the recent opening of
Lowe’s first 2-locations, will be taking advantage of some high-end technology to attract consumers to
the stores. The launching of its “Fix in Six” Vine campaign which will create animated window displays
providing 6-second how-to’s on quick and easy home-improvement tips that will be customized for city
living such as paint colors to use to make a space look larger; and hanging a bike from the ceiling to save
space. The new outposts will give Lowe’s a presence in both the Upper West Side and Midtown South’s Chelsea neighborhoods.
•
2008 Broadway on the corner of West 68th Street in a former Food Emporium location at the base of a 306-unit residential condominium
opened in mid-August;
•
635-641 Sixth Avenue on the corner of West 19th Street opened in September. SL Green’s office building at 635-641 Sixth Avenue
underwent a $15 million renovation and recombining of the 2 buildings which are located just a few blocks east of competing home
improvement retailer Home Depot’s 40 West 23rd Street store between 5th-and 6th Avenues.
The stores which are roughly 30,000 square feet, a significant reduction of earlier 145,000-square-foot outposts, will have merchandise
revamped for city shoppers. Heightened in-store digital services that utilize an Omni-channel retailing design — a first for Lowe’s, which
deliver a more seamless consumer experience between in-store, online and mobile shopping access. The Upper West Side store will feature:
•
“Endless Aisles” – The new digital system will link to Lowe’s website and allow customers to easily browse the company’s inventory
for in-store purchase. The system allows the smaller stores to virtually hold 1-million square feet of inventory through the flexible
fulfillment service platform that allows each store to see and transact on one another’s inventory. In-store items will be available for
same-day delivery; and next-day delivery for orders placed using in-store digital tools.
•
Life-size Screens – The installed displays will enable customers to search a larger assortment of appliances, view their actual size, and
see how they appear inside utilizing 3-D imaging.
•
Mobile Checkout – Store associates will be equipped with check-out ready iPhones for added purchasing speed and convenience.
CoWorking Concept for Fashion Retailers Debuts
The startup Public Factory that launched earlier this year will be leasing large retail
spaces that will be subdivided to create short-term rentals offering a more affordable
opportunity for emerging fashion designers. The company is expected to debut its
first location before the end of September at the SoHo Grand Hotel, 310 West
Broadway in a 10-year deal. The new 3,300-square-foot space will reportedly house founder Yazid Aksas’ own menswear label Beau.com
and 11 other designers with a focus on menswear. Members will pay $3,000 per month for a space of about 100 square feet ($360 per
square foot); and must commit to a minimum of a 3-month term. Looking ahead, Public Factory plans to open another location in SoHo for
womenswear designers, already attracting interest from about 25 brands.
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Developing Trends
North Shore LIJ Adds to Urgent-Care Facility Growth
The parent company of 21 hospitals will officially re-brand its name to Northwell in
January 2016; and has partnered with California-based Access Clinical Partners backed by
private equity firm TPG Capital, to launch its GoHealth Urgent Care centers. The opening
of 80 clinics over the next 5-years within North Shore LIJ’s market is planned despite
competition from already established independent clinics in the New York metro area such as CityMD, with 38 locations; and ProHEALTH
Urgent Care with 15 and growing, hoping to swing the trend in the hospital’s favor. There are currently 7 clinics throughout New York City
— 2 in Manhattan, 3 in Queens, and 2 in Staten Island, plus outposts in Long Island. According to the website the new clinics intend to
offer a convenient patient experience that is seamlessly integrated with its health system partners, while providing services at up to 80%
lower in cost than the hospital emergency department.
Although the urgent care model has existed for decades, its popularity has grown in the today’s fast-paced world where people are seeking
lower cost, more convenient walk-in access to healthcare needs. In addition, the model has further surged in recent years due to reportedly
increased interest from investors and insurance companies attracted to the solid returns on investment. While not all have achieved success
operating their own clinics, insurers see the potential to save on costs by directing patients to the right setting. Current large players in
the urgent care market reportedly include Blue Cross Blue Shield of South Carolina with roughly (50) Doctors Care clinics, and United
Healthcare with (8) Optum Clinics in Kansas, Nevada and Texas. Louisville, KY-based insurance provider Humana purchased the 300
medical centers operated by Concentra; but recently announced plans to sell the chain for $1.05 billion, which some sources speculate may
have been prompted by challenges Humana faced in operating its own clinics.
As the urgent care model becomes more sophisticated, some hospitals are seeking outside expertise to ensure that their clinics provide a
uniform experience both in appearance and quality that offers a more coffee shop-like aesthetic rather than a medical office. Hospital run
clinics will boast the advantage of a direct affiliation with a hospital, locating the outposts where possible near their health system facilities.
Other hospitals across the nation that are following a similar trend include:
GoHealth – Access Clinical Partners has also partnered with the 6 hospital Legacy Health, opening 6 clinics in the Portland, OR area with
5-more in the works.
Physicians Immediate Care – The state of Illinois’ largest urgent care provider has partnered with (3) of the 4-hospitals at Hinsdale-based
Adventist Midwest Health.
AFC/Doctors Express – A franchisee of the largest national urgent care chain established affiliations with both Boston-based Steward
Health Care System and Central Massachusetts Independent Physician Association.
Source:
http://www.hhnmag.com/Magazine/2015/May/fea_urgent-care-new-models • http://gohealthuc.com/#home
http://www.modernhealthcare.com/article/20150914/NEWS/150919954
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Developing Trends (cont’d)
The Allure of Atypical Space Heightens Amid Skyrocketing Retail Rents
As landlords pursue creative options to maximize asset value at a time when retailers are seeking more affordable outposts, both basement
and upper level space options are becoming a popular alternative that will potentially deliver financial benefits to both. Landlords have
reportedly begun to invest hundreds of millions of dollars repositioning below-grade space that previously generated little or no income for
retail, restaurant, and entertainment use, unlocking tremendous value while adding amenities that will make the building more attractive
to office tenants above. Prime lower level space is currently fetching an average asking rent of $75-$125 per square foot in comparison to
the over $1,000 to near $4,000 per square foot figures for ground level space demanded in some of the major retail corridors.
1633 Broadway (Columbus Circle) – The Paramount Group is planning to create a more prominent, 733-square-foot glass cube in the
plaza to help lure shoppers to the below grade space. The new 40,000-square-foot retail space spreads across 2-below grade levels and
is currently being marketed at a current asking price of $4 million per year ($100 per square foot).
28 Liberty Street (FiDi) – Fosun International Ltd. is reportedly investing a $100-$200 million in renovations at the former One Chase
Manhattan Plaza which will include the repositioning of about 200,000 square feet of space the spans 3 of the building’s 5-below grade
levels for retail use. Plans also call for the construction of 2-glass cube entries that will allow access to the lower level space.
Other landlords considering a similar repurposing include Tokyo-based Mitsui Fudosan which could utilize 40,000 square feet of basement
space at 1251 Sixth Avenue that could be linked to the building’s block-long plaza; Rockefeller Group at 1221 Sixth Avenue; and Fisher
Brothers which is considering replacing 2-brass fountains with a pair of glass portholes to bring sunlight to the subterranean space at 1345
Sixth Avenue.
Looking ahead, as the trend picks up steam developers of ground-up projects are rethinking the design of lower level space as exemplified
by the multi-building Essex Crossing project on the Lower East Side. The complex will feature a 700-foot, uninterrupted below-grade
pedestrian concourse dubbed Market Line with 100,000 square feet of retail space. The project’s developers Taconic Investment Partners
and L&M Partners have incorporated a 40-foot-tall glass wall dubbed “light scoop” that will enclose the concourse and extend 40-feet
above street level to channel light 25-feet below.
Furthering the search for affordable space, in addition to finding value below-grade, retailers are also shifting their interest to higher levels;
and were feasible, leasing space on upper floors. Presenting somewhat of a gamble due to decreased visibility in a city where the pace
is fast and people rarely look up, upper floor affordability offers the potential opportunity to establish a presence in a major retail corridor
that otherwise would be financially unfeasible. Technology has become a significant tool for advertising locations, further diminishing the
reliance on foot-traffic to attract consumers.
Hudson Furniture / 111 West 19th Street (Flatiron) – The specialized furniture retailer leased a 23,000-square-foot space last year on the
2nd floor, allowing the company to take advantage of the lower office rents. The company also has another 2nd-floor location at 413-419
West 14th Street (Chelsea/MePa).
Catch / 21 Ninth Avenue (Chelsea/MePa) – The EMM Group opened the restaurant in the 15,000-square-foot spread across the 2nd- and
3rd floors. The space which also boasts a rooftop area is 3-times larger than the ground level space that is currently home to cosmetic
retailer Sephora at reportedly a fraction of the cost. While about 90% of the eatery’s patrons are reservations, some sources point out
that a portion of the walk-in business could be lost due to the inability to easily view how crowded the restaurant is for diners that want
to be seated quickly.
Casper / 45 Bond Street (Greenwich Village) – The mattress start-up established its first showroom in the former 2nd-floor apartment to
create a homey feeling while also giving more privacy to customers as they try-out their mattresses, allowing them to avoid the peering
eyes of sidewalk passersby.
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Developing Trends (cont’d)
Landmark Buildings Offer a Unique Identity for Retail Outposts
The need to standout in today’s extremely competitive retail market has resulted in a shifting away from cookie-cutter storefronts, and has
heightened the allure of the city’s landmarked inventory which offer a history and story that adds unique value in a dense retail marketplace.
However renting a landmarked property brings the potential of significant additional costs due to extended build-out times with renovations
and changes in layout frequently requiring Landmarks Preservation Commission (LPC) approvals, but for some the establishing of a unique
store is worth the gamble. Increased activity has prompted the LPC to double the number on monthly hearings; and to approve permit
applications within 10-days of their completion.
Trunk Club / Villard Houses, 451-455 Madison Avenue (Plaza) – The 131-year-old landmarked property that boasts 16foot ceilings, small rooms, an elegant staircase, and a courtyard entrance sat vacant for 3-years prior to the Chicago, ILbased online menswear retailer leasing the 29,190-square-foot space spread across 6-stories last year. The renaissance
revival mansion once served as home to publisher Random House and the Municipal Art Society. The location offered an
eye-catching debut for the e-commerce retailer’s brick-and-mortar outpost in the city.
Apple:
•
103 Prince Street (SoHo) – The 3-story, 28,434-square-foot former U.S. Postal Service outpost built in 1920 was the
debut New York City location for the technology giant which leased the building in 2002.
•
940 Madison Avenue (Upper East Side) – the former U.S. Mortgage & Trust Co. building constructed in the 1920s
became home to Apple’s latest Manhattan outpost which opened in June. Apple completely restored the 12,580-squarefoot space back to its original grandeur.
•
Grand Central Terminal (Grand Central) – The 23,000-square-foot outpost within the historic terminal opened in 2011, and overlooks
the building’s main concourse from the east and northeast balconies.
Peruvian Connection / 341 Columbus Avenue (Upper West Side) – The Tonganoxie, KS-based womenswear
brand leased the 1,500-square-foot space to debut its brick-and-mortar outpost in Manhattan. Despite the
additional complications of restoring the site’s landmarked exterior to its original wood-paneled exterior, the
family-owned company that has always been based upon authenticity felt the additional $500,000 expense was
worth it.
Restoration Hardware / 9-19 Ninth Avenue ( MePa) - The home furnishings retailer was attracted to the landmarked
site’s industrial feel, opting to go through the added expense of shoring up the façade and creating a new building that
will be 2.5-stories taller behind the existing 2-story building’s historic façade.
The growing attraction has not gone unnoticed by developers that foresee prospective opportunity. Madison Realty Capital and private equity
investment firm Sigular Guff have recently acquired the 41,400-square-foot retail condominium located at 1 Hanson Place in Downtown
Brooklyn. The unit is comprised of roughly 16,330 square feet of ground level space, 6,203 square feet of mezzanine space, and 16,688
square feet of both usable and storage cellar space. New ownership intends to reposition and modernize the space that boasts 309-feet of
wraparound frontage along Hanson Place and Ashland Place; and features expansive 63-foot ceiling heights, ornate architectural features,
and 40-foot sculptured windows throughout the ground and mezzanine levels.
Source:
http://www.wsj.com/articles/SB10001424052970203413304577088201456063374
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Developing Trends (cont’d)
Thrift Stores Trending More Upscale
Secondhand clothing stores enjoyed an increase in sales following the recession, prompting some of the trendier companies to increase
their presence in the city such as Buffalo Exchange and Beacon’s Closet with 5- and 4 locations respectively. However last year saw a slowdown in sales as the economy continues to improve and consumers return to purchasing full-priced goods. Online secondhand retailers
have also heightened competition for the brick-and-mortar stores, companies such as California-based Real-Real and Tradesy which offer
high-end designer labels through convenient online platforms have respectively raised $83 million and $44.5 million in venture capital
funding.
In an effort to revive the secondhand market, some thrift-shop chains are investing to create a more boutique, high-end shopping experience
with more hand-picked merchandise; and improved display to diminish the need for shoppers to search through bins.
•
Goodwill Industries of Greater New York opened its 4th boutique outpost at 7 West 14th Street. The
4,500-square-foot Union Square location features hardwood floors, original fixtures, and trendy apparel displays.
Clothing selections will be more selective with a focus on targeting fashion-conscious shoppers, intending to
replicate the convenience at all of their 13 locations. In addition, Goodwill has partnered with Uber for donation
pick-ups to attract younger consumers who use the car service.
•
Salvation Army initiated a concept store at its 981 Manhattan Avenue donation center in Brooklyn’s Greenpoint
neighborhood last year. The boutique-type store featured hardwood floors and exposed-brick walls. In addition,
clothing displays throughout the shop were arranged within vintage pieces including an antique armoire, or
spread across a billiard table, replacing the previously overflowed, teetering shelves of used clothing, shoes and
housewares; and leather armchairs were available for shoppers’ use while in the store. Although the transformed
outpost met with enthusiastic response, a fire and flood at the site prompted the non-profit to shutter the
location in September with plans to sell the building. Similar efforts have resulted in last year’s creation of a
fancier shop with higher prices at one of the Salvation Army’s larger locations at 536 West 46th Street in Manhattan’s Times Square
neighborhood.
•
2nd Time Around consignment shop which has singled itself out with its high-end merchandise currently has
10-locations in Manhattan. Over the next year, the 42-year old retailer reportedly plans to add as many as 8-more
stores throughout the borough and (1) in Brooklyn to establish a larger market-share of the secondhand market.
Move Over Starbucks
The continued effort by landlords to create retail that is distinctive is giving a boost to artisanal purveyors of the popular elixir. The growing
trend was exemplified by the recent announcement that the Metropolitan Transportation Authority (MTA) decided to put out bids for a
space within Grand Central Terminal that is currently one of 2-locations occupied by Starbucks. The longtime tenant’s lease expired last
year; and although Starbucks put in an offer reportedly $315,700 more in rent over a 10-year period, the MTA preferred to seek out a more
independent or smaller brand in order to create a more diversified and interesting mix of local and national retailers within the terminal;
particularly in the instance where a brand has multiple locations within the transit hub.
A similar trend has been growing throughout the city, particularly amongst coffee shops, within trendier neighborhoods in Midtown South
such as Chelsea, Flatiron and the MePa districts. Boutique brands with fewer stores and less main-stream character are stirring a growing
evolution in coffee drinker choices. Some boutique newcomers include Blue Bottle, Think Coffee, and Brooklyn Roasting Company.
Some recent deals include (2) 1,500-square-foot leases — one at the soon to be opening 70 Pine Street (FiDi) by Black Box Coffee; and
the other by Zibetto Espresso Bar at 1221 Sixth Avenue (Times Square).
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Leasing Activity
Tenants in the Market
Four Seasons – It has been rumored that owners of the high-end restaurant are shifting their search
south, and currently in quiet negotiations with 28 Liberty Street (FiDi) owners Shanghai-based Fosun
International Ltd. They are reportedly one of 4-potential restaurateurs that are considering running the
restaurant, events, and conference center which Fosun is planning for the magnificent space. Located
on the 60th floor of the former One Chase Manhattan Plaza, the space previously housed Chase’s conference center. The building will be
undergoing renovations and a revitalization that is expected to range $100-$200 million in cost.
The Four Season’s current lease at the Seagram Building, 375 Park Avenue is due to expire sometime next year after negotiations to
renew failed. Other locations previously considered reportedly included 280 Park Avenue (Plaza); and 432 Park Avenue, a Midtown East
residential condominium that is currently under construction.
FAO Schwarz – Negotiations that prompted some sources to foresee an imminent lease deal for the renowned
toy retailer’s new 39,588-square-foot at 1633 Broadway broke down in August, reportedly just one week prior to
securing a lease. The 16,268 and 23,320 square feet on the lower and concourse levels has returned to the market
at its current asking price of $4 million per year ($100 per square foot). Details explaining the reasons behind the
failed deal were not released.
In the meantime it appears that contract vendees of the Brill Building, 1619 Broadway are in negotiations with both FAO Schwarz and
sister company Toys “R” Us for a co-branded store. Brill Holdings, a partnership of B+B Capital, Israeli firm Fox-Wizel, Conway Capital,
and Schottenstein Realty, is reportedly in contract to acquire the building located at the northwest corner of West 49th Street for $295
million. The 3rd- and 4th floors of the building were recently overhauled by the sellers to accommodate additional retail space, creating
a 45,000-square-foot unit spread across 4-levels that in March had been offered for sale as a retail condo unit at an asking price of $225
million. In addition, approvals have already been secured for the installation of LED signs along the lower façade of the landmarked
property. Rights to the operation of the signage will belong to the purchaser to be used for a retail tenant, or can be sold for ad space.
Asking rents for the roughly 10,000 square feet of ground level space is $700-$800 per square foot, the unit also offering 16,800 square
feet on each of the 3rd- and 4th floors plus 10,900 square feet of basement space.
Primark – The Ireland-based fashion retailer is reportedly exploring locations for a Manhattan outpost.
Focused on the West 34th Street corridor, the company has been unable to locate the 70,000 square
feet required for its first store in the borough. Primark is slated to open a store in 2016 at the Staten Island Mall in a space being leased
from Sears; and has reportedly leased a total of 520,000 gross square feet spread across 7-standalone stores from Sears Holdings in
mall-based locations throughout the Northeast. Sears will continue to have a significant presence at 6 of the locations in a streamlined,
100,000-square-foot store format.
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Leasing Activity (cont’d)
Lease Deals to Watch For
Nordstrom Rack / 3 Columbus Circle (Columbus Circle) – The discount high-fashion retailer is reportedly
considering a 40,000-square-foot multi-level space. Situated at the corner of Broadway and West 57th Street, the
space that spans the ground, 1st, and 2nd floors is currently occupied by a Bank of America branch. If the deal
moves forward for the new outpost, the off-price store will be located about one block west from the future 7-level
home of its full-priced sister store Nordstrom at 217-225 West 57th Street, which is currently under construction and expected to open in
2019. Nordstrom Rack currently operates 5-outposts throughout the city.
Lease Deal Highlights
Victoria’s Secret / 640 Fifth Avenue (Plaza) – The lingerie chain secured a 63,780-square-foot flagship
location at the tower as a result of a 16-year lease announced in October. The new outpost that is
expected to open November 2016 will feature 3-levels of selling space with 9,350 square feet on the
ground level and 78-feet of frontage along 5th Avenue.
Starbucks / 3-5 East 40th Street (Grand Central) – The popular coffee brand will be adding another outpost to its city roster, leasing 3,310
square feet at a reported asking rent of $200,000 per year. The new store comprised of 2,600- and 650 square feet on the ground and
basement levels is expected to open before the end of the year. Formerly home to Salmon River Restaurant, the space is situated at the
base of Marriott’s 185-room Courtyard New York Manhattan/Fifth Avenue hotel located between Madison and 5th Avenues.
Starbucks / 21-25 Union Square West (Union Square) – The popular coffee purveyor will be relocating down the block
as a result of the recently announced 10-year deal for 4,000 square feet, deciding to vacate the corner space at 41 Union
Square West they have called home for about 15-years. The parallel move will offer 2,500 square feet of ground space
and 1,500-square-feet of non-selling basement space, plus outdoor seating at a reported asking rent of $450 per square
foot. The current corner location comprised of 2,800- and 1,500 square feet of respective ground and basement space
at East 17th Street/Broadway is currently being marketed at an asking rent of $650 per square foot versus the $325
figure Starbucks is currently paying according to sources. Relocation is slated for this fall to the space that was formerly home to a Toasties
deli, with plans to debut their high-end slow bar that will serve Starbucks’ Reserve coffees as an added component to the new outpost.
51 Astor Place (Greenwich Village) – The 3-latest 10-year deals totaling 8,415 square feet will leave only one retail vacancy at the property
as it nears 100% retail occupancy; having totally leased the office space in April. The new tenants will be joining CVS Pharmacy as a result
of the 11,500-square-foot deal announced in July.
•
Flywheel Sports – The fitness company will occupy a total of 5,018 square feet encompassing 500 square feet of ground level space
and 4,518 square feet of lower level space at asking rents of $250- and $100 per square foot respectively;
•
Bluestone Lane – The coffee house will be opening its 7th city outpost in 1,034 square feet of ground level space at an asking rent
of $250 per square foot;
•
Chop’t Creative Salad Company – The salad eatery leased 2,363 square feet of ground level space at an asking rent of $250 per
square foot.
Source:
http://www.wsj.com/articles/SB10001424127887323320404578216011541223382
http://www.silive.com/westshore/index.ssf/2014/10/sears_to_lease_space_to_primar.html
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Leasing Activity (cont’d)
Lease Deal Highlights (cont’d)
Planet Fitness / 145 Clinton Street (Lower East Side) – The discount fitness chain will be the latest retail addition to
the multi-building Essex Crossing project being led by co-developers Taconic Investment Partners and L&M Partners.
Located within the Seward Park Urban Renewal Area (SPURA), Planet Fitness will open their new outpost in roughly
22,000 square feet spread across the 1st, 2nd, and basement levels of the planned 15-story mixed-used development
that broke ground this summer with an expected delivery in 2017. Asking rent for the 2nd floor space was reportedly
about $100 per square foot. Planet Fitness will be joining retail anchor tenant Regal Cinema and the Essex Street Market.
Jean-Georges Vongerichten / South Street Seaport (FiDi) – The world-renowned restaurateur signed a lease with Howard Hughes
Corporation for 40,000 square feet for an open food market in the landmarked Tin Building which the developer will be restoring. An
additional deal for 10,000 square feet that includes a 2,500-square-foot patio will bring a seafood restaurant to the 2nd-floor of the new
365,000-square-foot Pier 17 that is currently under construction. Details of the leases were not disclosed.
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Leasing Activity (cont’d)
New to Market
680 Madison Avenue (Plaza) – Fashion brand Qela, a subsidiary of the Qatari ruling family’s non-profit-arm is reportedly seeking to
sublease the 2-level, 6,230-square-foot space leased last January. The corner space that spreads across 3,000- and 3,230 square feet on
the ground and 2nd levels was intended to house a combination of retail with an art gallery on a portion of the 2nd floor. Paying upwards
of $2,000 per square foot for the ground level space, the store has remained vacant to date. The 35,000-square-foot retail condo sits at the
base of the residential co-op conversion of the former Carlton House. It is situated between Hermès and Barney’s; and had been acquired
by Thor equities in early 2013 for $277 million from Extell Development.
565 Fifth Avenue (Grand Central) – Stawski Partners has introduced to the market a 31,583-square-foot multi-level space situated at the
base of the 29-story tower. Located at the northeast corner of East 46th Street, the unit is comprised of 7,433 square feet of ground level
space at an asking rent of $1,200 per square foot, plus 14,150- and 10,000 square feet of mezzanine and lower level space respectively
with ceiling heights ranging 13 to 18-feet. The space was formerly home to a Build-A-Bear workshop and a L’Oreal outpost which will be
relocating to a new 1,000-square-foot location at 404 Fifth Avenue.
10 Sullivan Street (SoHo) – Contract vendee Manhattan-based Global Property has introduced the
2,650-square-foot retail condominium to the market. The unit comprised of 1,859 square feet of
ground level space and 791 square feet of lower level selling space is situated at the base of a 16-story,
19-unit high-end residential condominium development that is almost sold-out. Located at the gateway
to SoHo and TriBeCa, the unit that boasts over 90-feet of wraparound glass-walled frontage sits at the
crossroads of 3-streets — Sullivan Street, Broome Street, and 6th Avenue. Ceiling heights are 22- and
16-foot for the ground and lower level space respectively.
10 Sullivan Street - Rendering
Source:
http://www.wsj.com/articles/whats-the-deal-commercial-property-news-1442191865
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Retail Condo Purchases Gain Momentum in High-Rent Market
The desire to own retail real estate in Manhattan combined with a growing inventory of retail condo units coming online as residential
condominium projects swell in numbers, seems to deliver a win-win economics for both developers and retailers at a time when rents are
high. Typically the highest priced per square foot space within a building, a growing desirability is driving retail condo values higher; but
despite climbing prices, some industry sources remark that they have become great investments for buyers. Current cap rates for fully
leased retail condos average in the 4%-range, about 1% lower than a year ago due to growing demand for the asset and continued low
interest rates according to reports.
Advantages of ownership include:
•
Typically easy to trade;
•
Less management intensive;
•
Potential asset appreciation above an end user’s business pending location and other factors. End user acquisitions are less frequent,
typically paying 10-15% above that of an investor;
•
Concerns about the management of numerous tenants that are protected by long term leases, or maybe rent regulations is eliminated
for international investors.
A building’s retail space has become such a valuable component within building’s today that developers now put a great deal of attention
and study into the designing of retail space within new projects in order to maximize value and meet tenants’ needs. The layout of the space
is no longer an afterthought; and items such as column spacing, façade, entrances and the placement of electrical and plumbing carefully
planned out during the design stages of the project. Adding further advantage, for those developers that are able to pre-sell the retail
condos within their projects, securing financing can sometimes ease as banks tend to feel more comfortable providing loans on project
where contracts for the retail are in place.
Some smaller retailers have shifted to buying, tired of being priced-out of leased locations. Some deep-pocketed firms are taking advantage
of the opportunity to monetize on the long-term investment, rather than depreciate and amortize over just a 10- to 15-year lease term.
Fashion brand Zara’s parent company Inditex acquired the retail condo at 503-511 Broadway in January for $284.235 million. The over
40,000-square-foot retail condo that commanded roughly $20,588 per square foot based upon ground level space, is spread across the
ground, 2nd and cellar levels of the SoHo building.
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Sale Activity
New to Market
507 West 24th Street (Chelsea) – SR Capital has introduced to the market the single-story, 7,200-square-foot building constructed primarily
for gallery or showroom use at an asking price of $16 million ($2,222 per square foot). The 3,900-square-foot ground level space boasts
15-foot ceilings, with 10-foot ceilings in the 3,300-square-foot lower level. Located under the elevated High Line park, the building was
developed about 1-year ago as a temporary outpost for 303 Gallery until their 11,234-square-foot permanent home within a retail condo
at the base of newly constructed 551 West 21st Street was delivered.
Sales to Watch for
837 Second Avenue (Midtown East) – A partnership of Great Neck-based Klosed Properties and Namdar Realty
are reportedly in contract to purchase the 5-story mixed-use building for $5.9 million ($768 per square foot) from
co-owners Wally Ganzi and Bruce Bozzi. The sellers decided to sell the 7,680-square-foot building, abandoning plans
to renovate the 3,600 square feet of retail space on the ground and 1st-floors which is the original outpost of their
steakhouse restaurant The Palm since 1926. At the restaurant’s peak in the 1970’s, a 2nd location directly across
the street at 840 Second Avenue was opened to handle patron volume, bringing the total up to 4 upon opening
locations in the West Side and TriBeCa. New ownership is planning to renovate the building, upgrading the retail
space and converting the upper floors that have been used for storage into apartments.
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Sale Activity (cont’d)
Sales to Watch for (cont’d)
445 Fifth Avenue (Grand Central) – Harbor Group International is reportedly in contract to acquire the 20,000-square-foot retail condo for
$68 million ($3,400 per square foot) from Thor Equities. The unit situated at the base of a 174-unit residential condominium is located on
the northeast corner of East 39th Street. The pending deal will result in a sale price that is double the $32.5 million ($1,625 per square
foot) figure paid by Thor in 2011. Currently jewelry and accessories retailer Charming Charlie occupies the majority of the retail space that
spans the 1st and 2nd floors, having secured a lease for 15,500 square feet in 2013.
10 Sullivan Street (SoHo) – Manhattan-based Global Property Investors has agreed to acquire the
2,600-square-foot retail condominium comprised of 1,859- and 791-square-foot ground and lower level space
for reportedly $5 million ($2,690 per square foot based on ground level square footage) from co-developers
Madison Equities and Property Markets Group (PMG). The space that features high ceilings is situated at the
base of a 16-story, 19-unit residential condominium that is almost sold-out and nearing completion on the
triangular site of a former car wash located on the west-side of 6th Avenue bordering Hudson Square, just
north of TriBeCa. Increased residential development in SoHo continues to heighten residential density, driving
retail values higher.
10 Sullivan Street - Rendering
106-112 Spring Street aka 95-99 Mercer Street / 91-93 Mercer Street (SoHo) – A partnership of the Carlyle Group and Manhattanbased investment firm 60 Guilders are reportedly the leading bidders to acquire the 12,000-square-foot co-op for $140 million from the
corporation Workspace, which controls both co-op buildings. The bid for the space comprised of roughly 9,000- and 3,000 square feet of
respective ground and lower level space equates to $15,556 per square foot based upon the ground square footage. Other respondents
to the offering include Thor Equities; and first-time entrant to the Manhattan retail market, Dallas, TX-based Cypress Equities. The space
is currently home to sporting goods store Burton Snowboards, a tenant at the Spring Street location since 2005; and fashion company
Helmut Lang which opened a pop-up in the Mercer Street space in 2011, subsequently signing a 10-year lease in 2012.
Other sale activity along Spring Street includes:
•
115-117 Spring Street – The 5,210-square-foot retail condominium sold for $52 million July 2014.
•
202 Spring Street – The 3,455-square-foot retail condominium sold for $7 million August 2014. The unit was comprised of 2,200- and
1,255 square feet of ground and lower level selling space.
•
21-23 Mercer Street – The 3,201-square-foot retail condominium sold for $10.2 million in 2013.
549-555 and 557-559 Broadway (SoHo) – A winning bid of $400 million ($15,825 per square foot based upon the ground level space) for
the 32,000-square-foot retail condo by a partnership of Madison Capital and an undisclosed investor from publishing company Scholastic
was announced in April. However, the deal may now be shaky due to a recent decision by the city’s Board of Standards and Appeals (BSA).
Although plans proposed by Scholastic to relocate their lobby to Mercer Street in order to make way for additional retail space was approved
by the BSA, a restricted limit of 10,000 per square foot for each store due to zoning regulations was stipulated along with other conditions
regarding signage and illumination limitations. As a result, the retail’s value will be significantly diminished according to some sources.
The original offering of retail space that would span the 2-connected buildings was comprised of 25,275 square feet and 6,000 square feet
on the ground and lower levels respectively. A total of 17,875 square feet of existing space is currently occupied through long-term leases
by fashion firm Hugo Boss and cosmetics retailer Sephora, plus an additional 7,400 square feet of newly created vacant space at 557559 Broadway. In addition the deal included an additional 24,500 square feet that spreads across the entire 2nd floor plus an unspecified
portion of the 3rd floor could be vacated by the publisher for conversion to retail use. A contract has yet to be signed by Madison Capital
due to plans put on hold by Scholastic back in April, yet a September 24 earnings call reportedly announced the publisher’s plans to begin
the required construction in November.
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Sale Activity (cont’d)
Sale Highlights
601 Fifth Avenue (Plaza) – An entity reportedly affiliated with H&M chairman
Stefan Persson has acquired the 12,420-square-foot office/retail building for
roughly $137 million ($11,034 per square foot) from long-time owner Benetton. Located just south of East 49th Street, the 6-story
building’s retail space has been home to Treviso, Italy-based United Colors of Benetton since 2002. It is not clear if the store will close
as a result of the sale. Asking rents for ground level space along the 5th Avenue corridor between 42nd – and 49th Streets are averaging
$1,200 per square foot; and jump to a range of $3,500-$3,800 between 49th- and 59th Streets according the Real Estate Board of New
York’s (REBNY) Spring 2015 Retail Report. The building is located just one-block north of H&M’s 57,000-square-foot store at 589 Fifth
Avenue which opened last year.
1604-1610 Broadway aka 732-736 Seventh Avenue (Times Square) – New York-based Atlas Capital Group has acquired the leasehold
for the 5-story, 41,100-square-foot retail building for $15.5 million ($377 per square foot). The building is currently about 75% vacant, with
only the recently emerged from bankruptcy national chain Mama Sbarro’s occupying 7,006 square feet in a lease that expires July 2019.
The purchase of the leasehold being held by special servicer Torchlight Loan Services resulted in the total write-off of a $27 million loan
backed by the property. The loan was originally issued in 2005 by Deutsche Bank to an entity led by SL Green Realty upon acquiring the
controlling 90% leasehold interest in the property, in a deal that was subject to a ground lease from fee-owner Farmore Realty that was
extended from 2019 to 2036 as part of the transaction. The loan was securitized in 2007, sold to U.S. Bank in July 2009; and then about
4-months later sent to the special servicer due to imminent default resulting from cash-flow problems triggered when the primary tenant,
Spotlight Live Club filed for bankruptcy ending its lease for 23,000 square feet.
Future plans by new ownership were not announced for the building or the vacant space that spans 5-floors including a roof deck. The
property offers 35-feet of frontage on Broadway plus the potential opportunity for billboard signage.
148 West 24th Street (Chelsea) – Okada Acquisitions acquired the 6,500-square-foot retail condominium for
$3.4 million ($850 per square foot based upon ground square-footage) from Rye, NY-based Guru State. The unit
comprised of 4,000- and 2,500 square feet of ground and basement space is situated at the base of a 12-story,
60,000-square-foot office building; and currently home to Barcade, a mix of craft beer pub and retro arcade on
a long-term lease. New ownership intends to keep the business in place that has enjoyed growing popularity,
with outposts opening in several of the city’s trendy neighborhoods such as Williamsburg’s 388 Union Avenue
— one of their first locations.
Source:
http://investor.shareholder.com/slg/releasedetail.cfm?releaseid=181027
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Sale Activity (cont’d)
Sale Highlights (cont’d)
113 Spring Street (SoHo) – Morgan Stanley Real Estate purchased the roughly 16,300-square foot mixed-use building
for $70 million ($4,294 per square foot) from Status Capital and Centurion Realty. The sale price was over double that
$32.5 million ($1,994 per square foot) figure paid in 2012 in part due to surging retail rents within SoHo continuing to drive
property values higher. The 5-story building has about 6,000 square feet of retail space spread across 2-stories, currently
home to shoe retailer Frye at a reportedly below-market rent in a current lease that expires in 2021.
Other recent sale activity along Spring Street includes the acquisition of an 80% stake by Dallas, TX-based Invesco
Real Estate in 131-137 Spring Street for roughly $4,085 per square foot. The 6-story, 68,000-square-foot building has
approximately 10,495 square feet of retail space currently leased to clothing labels Diesel and Burberry. Burberry’s
lease for its 6,000-square-foot space will expire next year.
205 Bleecker Street (Greenwich Village) – A partnership of Infinity Real Estate and Seven Equities has acquired the vacant 6,097-squarefoot retail condominium for $9.8 million ($2,598 per square foot based on ground level square footage) from Queens-based Forest Hills
Property Group. Located near New York University on the corner of Minetta Street, the unit offers 3,722 square feet of ground level space
and 2,325 square feet in the cellar. New ownership plans to repurpose the space situated at the base of a 40-unit residential pre-war
building, which formerly housed one of Banana Republic’s first New York City outposts; and more recently an American Apparel.
77 Bleecker Street aka 649-657 Broadway (Greenwich Village) – The residents of the 243-unit residential co-op
acquired the master lease for the 18,650 square feet of office and retail space at the building’s base for $25.8 million
($1,383 per square foot) from Bi-Coastal Properties. The space is comprised of 5-retail spaces on the ground level
with 4-units currently occupied by tenants that include Sprint, yogurt store Yogorino. The basement level office
space is divided into 14-windowed units plus 1,800 square feet of storage space. A 6th retail unit that is occupied by
the skateboard retailer Blades was not included in the deal.
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Sale Activity (cont’d)
Sale Highlights (cont’d)
144 Fulton Street (Insurance) – Crown Acquisitions has acquired the 3-story, 8071-square-foot commercial building for $25 million ($3,098
per square foot) from an undisclosed seller. A $19 million acquisition loan was secured from Singapore-based lender United Overseas
Bank. Although future plans were not announced for the property located adjacent to the new Fulton Transit Center, the building which is
currently home to a souvenir outpost offers over 45,000 buildable square feet of potential redevelopment to reposition the property for a
major national brand.
202-204 Canal Street (Chinatown) – A partnership of Innovo Property Group and Artemis Real Estate
Partners has acquired the 15,500-square-foot retail condo for $44 million ($2,839 per square foot) from
Crane Partners. A $30 million loan was secured from lender Bank of China, with the partnership contributed the remaining $14 million to
close the deal. The building has a 15-year, triple-net lease with the Industrial and Commercial Bank of China (ICBC) that will generate a
steady stream of income for new ownership of the retail unit that spreads across the ground, 2nd and 3rd floors.
1055 Madison Avenue aka 1049-1059 Madison Avenue (Upper East Side) – Status Capital acquired the 10,000-square-foot retail
condominium for $48 million ($4,800 per square foot) from the estate of late art collector Norman Alexander. The unit which is situated at
the base of a 27-story, 50-unit residential condominium was formerly home to fashion brand Joe Fresh; and is comprised of 4,500 square
feet of both ground and lower level space plus a 1,000-square-foot mezzanine. The Canada-based clothing chain that is undergoing financial
struggles vacated the space this summer, but reportedly continues to pay a below-market rent for the short-term lease that has 2-years of
term remaining.
2211 Third Avenue (Harlem) – Supermarket company Super Fi Emporium has acquired the 12,000-square-foot retail condominium for $10
million ($833 per square foot) from developer HAP Investments. The unit will be located at the base of a planned 120,000-square-foot
mixed-use development between East 120th- and 121st Streets. The new 80/20 building will house a mix of residential, office and retail
space; and because of the inclusion of a grocery store, HAP has filed applications for the Food Retail Expansion to Support Health (FRESH)
program that offers tax breaks and zoning incentives to projects that include food markets in low-income areas.
Riverdale Crossing, 184 West 237th Street (Riverdale) – New York-based Vanbarton Group has acquired the
159,037-square-foot retail complex for $133 million ($836 per square foot) from the joint venture of Metropolitan Realty
Associates and Angelo Gordon & Co. The approximately 98% leased shopping center that opened last year is located
at the foot of the 1-Subway line and adjacent to the Major Deegan Expressway. An acquisition loan was secured for an
undisclosed amount from Northwestern Mutual. BJ’s Wholesale Club will be the anchor tenant in a 120,000-square-foot store, joining a
tenant roster that includes Petco, City MD, Chipotle, Smashburger, and Buffalo Wild Wings. The 2-building outdoor mall replaced the former
home of Stella D’Oro Biscuit Company’s factory which was acquired in 2011 for $18.75 million ($114 per buildable-square-foot); and
achieved 97% pre-construction leasing in 2014.
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Development Activity
Sales to Watch For:
570 Fifth Avenue / 574 Fifth Avenue (Times Square) – An undisclosed buyer is reportedly in contract to acquire the 2-retail development
sites for $125.4 million from SL Green Realty in a deal that is expected to close before the end of the year. The REIT had acquired both
parcels from Extell Development in 2013 for a combined price of $78.7 million. Company sources noted that the equity capital generated
from the sale will be redirected into 11 Madison Avenue (Flatiron), the over 2.3 million-square-foot office tower SL Green acquired in
August.
1031-1049 and 1051 Westchester Avenue / 1945-1955 Westchester Avenue (Longwood/Parkchester) – Ryms Realty Group is reportedly
in contract to acquire the 3-building, 84,000-square-foot portfolio from the Vanbarton Group (formerly Emmes Asset Management) for $39
million. The South Bronx properties are comprised of (2) single-story retail strips and a 3-story building that offers office space on its upper
floors. New ownership plans to reposition the multi-tenant portfolio comprised of several mom-and-pop stores to attract 2 or 3 national
brands. Bigger tenants such as a Chase Bank branch; and a Walgreens whose lease expires in about 20-years will be retained. Asking
rents in the area reportedly range in the high $30s per square foot for stores less than 4,000 square feet; and up to $25-$30 per square
foot for larger locations. The sale is expected to close in October, representing a close to $12 million increase over the $27.1 million figure
paid in 2013.
Project Plans in Progress
5-7 East 59th Street (Plaza) – GreenOak Real Estate and Capstone Equities are planning to reposition
the former Playboy Club to target high-end retail tenants. The existing 9-story, 46,000 square-foot
building will be renovated into 8-stories of office space atop a retail showroom space with 22-foot
ceiling heights. The partnership acquired the building located across from Apple’s 5th Avenue store
earlier this year for $85 million ($1,848 per square-foot), hoping to drive revenues of over $10 million
per year. The space will be facing competition from adjacent 650 Madison Avenue which will have a
62,000-square-foot retail availability due to 20-year tenant Crate & Barrel vacating the flagship store
this year.
Source:
http://investor.shareholder.com/slg/releasedetail.cfm?ReleaseID=932061
5-7 East 59th Street - Rendering
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Shrinkage & Expansions
Midtown’s Major Retail Corridors Too Pricey for some Homeware Retailers
Rising retail rents in Midtown are making it financially challenging for some retailers to remain in their large, high profile locations as sales
generated at the brick-and-mortar locations no longer justify the escalating rent overhead as renewals arise. Over a period of 60-days,
3-homeware chains have retreated from the neighborhood’s highly-trafficked east side as a result, despite in some instances being located
off main streets. Some retailers chose to rely on name recognition to attract consumers to the side streets that were less prominent but
offered lower rents. Now side streets such as East 59th Street are reportedly commanding asking rents nearing main avenue price levels.
In today’s retail market landlords have found it more financially lucrative to divide large stores into smaller parcels,
exemplified by the 110,000-square-foot flagship outpost at 1514-1530 Broadway (Times Square) that Toys ‘R’ Us is
planning to vacate. Currently being marketed as multiple retail units on 3-levels, about 56% of the space has already
been leased by Gap, Inc. to be divided between the company’s Gap and Old Navy brands. While some industry sources
point to high rents as the primary cause of the recent closures, others place blame on the companies’ failure
to evolve with the changing times; and that the recent availability of some large blocks of space has created a
welcomed opportunity for new retailers that have been interested in entering the Midtown corridor, but due to
a lack of space have until now been unable.
•
Crate & Barrel vacated their 62,000-square-foot outpost at 650 Madison Avenue in August. Located at the
corner of East 59th Street, the multi-level store had been the 53-year old retailer’s home for 20-years; and
no relocation is planned.
•
Williams-Sonoma / Pottery Barn vacated the shared 35,000-square-foot outpost in September.
The 3-story retail condominium located between Lexington and Park Avenues has housed the sister
brands for over 15-years. The space that is being marketed as divisible will be gut renovated; and is
currently being offered at an asking price of $6.5 million per year, with an asking of $400 per square
foot at grade.
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Shrinkage & Expansions (cont’d)
Diners Fading into Obsolescence
The days of existence of the classic diner in New York City may be numbered. Despite typically boasting a 6% profit margin which has
historically made diners more profitable than most restaurants according to reports, margins have halved in recent years due to the rising
costs such as rent and staff payrolls. Changing tastes and eating habits, numerous closures, and with the diminished number of new
diner openings the situation appears to be unfavorable for the city’s affordable comfort food scene. Today’s cost to open a new diner can
reportedly reach $4 million, in comparison to $500,000-$1 million for a higher-end restaurant due to the increased amount of storage space
for the inventory that large diner menus require. Despite efforts by some owners to adapt with offerings of trendier menu items and more
vegetarian options, the roughly estimated 1,000 diners that existed in the city 10-years ago has significantly lessened to 398 establishments
that under the city Department of Health records included eateries that have “diner or “coffee shop” in their name.
Recent closures reportedly include Soup Burg at 1095 Lexington Avenue in the Upper East Side; Café Edison at 228 West 47th Street in
Midtown; the El Greco Diner at 1821 Emmons Avenue in Brooklyn’s Sheepshead Bay area; and the Market Diner at 572 Eleventh Avenue
in Manhattan’s Hell’s Kitchen/Clinton Hill neighborhood that is expected to close as a result of a planned redevelopment of the existing
structure into a residential condominium. In addition, competition from food chains, which can support losses in ways that independent
owners can’t; and food carts have also attributed to furthering the disappearance of diners.
Looking to Expand
Restoration Hardware Jumps into the Hospitality Market – The California-based hardware and home
furnishings chain will debut its first boutique hotel in the city’s Meatpacking district. The company has leased
the entire 5-story, 26,661-square-foot building at 53-61 Gansevoort Street, although details of the deal were
not disclosed. The property owned by Delshah Capital is directly across from the Gansevoort Market; one
block east of the Whitney Museum & High Line park; and one-block south of the retailer’s new flagship store
at 9-19 Ninth Avenue that is currently being redeveloped. The planned 14-room hotel will in part serve as a
showroom with all the rooms featuring Restoration Hardware’s furniture and fixtures. A restaurant will be housed in the ground level space,
the company hoping to achieve similar success of nearby Standard Hotel which generates more money from its food and beverage than
almost any other hostelry. Plans for the redevelopment of the existing former warehouse were filed in June 2014.
Lord & Taylor Joins Growing Roster of Off-Price Store Launches
The department store chain owned by Canada-based Hudson’s Bay Co. has announced the launching of an off-price
chain dubbed Find @ Lord & Taylor.. The first location slated to open in November in Paramus, NJ is a 30,000-squarefoot space formerly home to now shuttered fashion discounter Loehmann’s. At least 6-additional outposts are
schedule to open in 2016.
Unlike the full-line department stores, the discount versions don’t rely heavily on sales or discounts; but maintain consistent, already heavily
discounted prices. Reported statistics compiled by research firm Customer Growth Partners reveals that major off-price chains are expected
to generate $42 billion is sales in 2015 — up from $27 billion in 2009. While figures lag behind the $59 billion in sales expected during te
same period from the major full-line department stores — down from $64 billion in 2009, the gap continues to narrow.
The Find @ Lord & Taylor stores will be merchandised to attract shoppers in their 20s and 30s, offering a wider selection of children’s goods
and home products than typical for the namesake brand. The news comes following several other major department stores similarly with
plans in the works or already launching discount stores for their full-line namesake chains. As the number of off-price chains increases,
competition will intensify. Luxury department store Saks 5th Avenue, also owned by Hudson’s Bay is reportedly scheduled to open 24-new
Saks|Off 5th stores in 2016 bringing the total to 110. Others include Last Call by Dallas, TX-based Neiman Marcus, Bloomingale’s Outlets;
and more recently Macy’s Backstage, which will launch in 4-pilot locations in or near the city before the end of the year.
Sources:
http://ny.curbed.com/archives/2015/08/03/restoration_hardware_is_opening_a_boutique_hotel_in_mepa.php
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Shrinkage & Expansions (cont’d)
Looming Closures
Macy’s to Shutter Stores in 2016 – The Cincinnati, OH-based retailer reportedly announced
plans to close 35-40 of its namesake stores early next year, in addition to the 52 locations
closed over the past 5-years that were slightly offset by 12-openings. Currently operating
770 outposts, the multi-national holding company (formerly Federated Department Stores)
continues to explore new avenues to boost sale revenue. It was recently announced that a new fleet of off-price stores dubbed Backstage
will debut, planning to open 6 before the end of the year with additional openings in 2016. In addition, the offering of goods via online sales
in China through a joint venture with a retailer based in Hong Kong is being tested; as well as the sale of consumer electronics with the
experimental opening of Best Buy shops in 10 of its stores in November to be staffed by Best Buy employees. Macy’s, which also operates
Bloomingdale’s department stores, acquired upscale beauty retailer Bluemercury’s 885 locations earlier this year.
American Apparel Files for Bankruptcy – The Los Angeles, CA-based fashion company
is hoping to improve their financial footing through a reorganization of the company’s
current debts that have reportedly exceeded its assets, posting losses every year since 2010. As part of a pre-arranged Chapter 11, over
$200 million of bonds will be exchanged for stock in the reorganized company. The clothing retailer will have access to financing after its
restructuring, with business activity remaining ongoing throughout the reorganization efforts. The restructuring plan is subject to approvals
by the bankruptcy court and other certain conditions, but American Apparel intended to pay all of its suppliers in full on or after the October
5 filing date. To further increase market share and sales, plans are in the works to create new products, launch new design initiatives, invest
in new stores, and increase its e-commerce business. Currently the retailer has 17-outposts spread across Manhattan and Brooklyn, plus
1-outlet location at 285 Lafayette Street (NoLita) according to their website.
Organic Avenue Shutters All Outposts – The Manhattan-based health-oriented juice and sandwich chain that
describes itself as “the premier organic plant-based grab & go retailer” closed its 10 locations throughout Manhattan in
mid-October due to ongoing financial struggles. According to the reported Chapter 7 bankruptcy filing, Organic Avenue
listed $3.4 million in assets and $2.5 million in liabilities. Launched in 2000, the company opened its first store in 2006,
followed by a period of expansion between 2008 and 2013. Currently owned by investment firm Vested Capital Partners
which reportedly acquired the chain in August in exchange for stock options with no up-front cash from private equity
firm Weld North. Organic Avenue’s revenue seems to have peaked in June 2013, generating close to $20 million at the time with 12-outposts.
Weld North had anticipated future openings of 20 more stores which range in size from 300-1,200 square feet, but in January 2015 Organic
Avenue reportedly filed notice with the State Department of Labor for anticipated layoffs at their 15,000-square-foot commissary kitchen in
Long Island City; and the closure of 2 stores. Efforts to revamp their menu and reclaim market-share amidst the increasing competition from
the growing number of newer juicing companies was evidently unsuccessful, the company unable to financially rebound. It is anticipated
that some competitors may have interest in some of Organic Avenue’s shuttered outposts such as Juice Press, which launched in 2010 and
expects to reach $40 million in sales for 2015; as well as Juice Generation and Liquiteria which have also been expanding.
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Notable Retail Transactions
Lease
Address
Submarket
District
Shemerhorn Row
South Street Seaport
Downtown
FiDi
10,000
McNally Jackson (new construction)
Downtown
FiDi
40,000
Jean-Georges Vongerichten
Midtown South
Lower East Side
22,000
Planet Fitness (new construction)
50 Bond Street
Midtown South
NoHo
6,400
Lululemon Athletica
41 West 25th Street
Midtown South
Chelsea
5,724
Manhattan Center for Kitchen & Bath (relocation)
139 Fifth Avenue
Midtown South
Flatiron
5,500
Eva Scrivo Salon (relocation)
51 Astor Place
Midtown South
Greenwich Village
5,018
Flywheel
640 Fifth Avenue
Midtown
Plaza
64,000
Victoria’s Secret
34 West 33rd Street
Midtown
Penn Plaza
11,032
New 32 America (yet to be named cosmetic store)
404 Fifth Avenue
Midtown
Penn Plaza
10,000
L’Oreal (relocation)
625 West 57th Street
Midtown
Hell’s Kitchen
Address
Submarket
District
Sq. Ftge
Sold Price
148 West 24th Street
Midtown South
Chelsea
6,500
$3,400,000
Tin Building
145 Clinton Street
Essex Crossing
Sq. Ftge
7,000
Tenant
Livanos Restaurant Group (Name TBD; new constr.)
Sales
113 Spring Street
Midtown South
SoHo
205 Bleecker Street
Midtown South
Greenwich Village
202-204 Canal Street
Midtown South
601 Fifth Avenue
Purchaser
Okada Acquisitions (Condo)
Morgan Stanley Real Estate
(Mixed-use bldg)
16,300
$70,000,000
6,097
$9,800,000
Chinatown
15,500
$44,000,000
Innovo Property Group
Artemis Real Estate (Condo)
Midtown
Plaza
12,420
$137,000,000
Affiliate of H&M Chairperson
Office/Retail building
1604-1610 Broadway
Midtown
Times Square
41,100
$15,500,000
Atlas Capital Group
(Leasehold, Bldg)
1055 Madison Avenue
Uptown
Upper East Side
10,000
$48,000,000
Status Capital (Condo)
2211 Third Avenue
Upper Mnhtn
Harlem
12,000
$10,000,000
Super Fi Emporium (Condo)
The Mid-Quarter Retail Report is produced by:
Jamie Mason | Director of Marketing & Research
ABS Partners Real Estate, LLC
Infinity Real Estate
Seven Equities (Condo)
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For More Information Please Contact:
212.400.6060
•
www.absre.com
200 Park Avenue South, 10th Floor, New York, NY 10003
We Build Partnerships That Last
Although the information furnished is from sources deemed reliable such information has not been verified and no express representation is made nor is any implied as to the accuracy thereof. Sources: CoStar Group, The
Real Deal, Crain’s New York Business, The New York Times, New York Post, New York Yimby, and Commercial Observer