Brokers report retail rents are rising dramatically along the most desirable New York corridors and areas with availability are like prom queens getting multiple proposals. Foreign retailers, in particular, are more confident about digging in and are trolling for a space they can both afford and still get feet on the street.
As ever, pedestrian traffic patterns are the key factor weighing on brokers’ minds. In Midtown, many brokers insist no one stops walking south along Fifth Avenue when they get to 49th St. “This area is evolving with limited availabilities and it will fill in,” said Joanne Podell, vice chairman of Cushman & Wakefield. “It’s half the rent; it’s not half the foot traffic.”
Robert Futterman, CEO of RKF, is marketing 44,420 square feet on four levels at 475 Fifth Ave., on the southeast corner of 41st Street by Bryant Park. “It’s probably half of the price to be there than to be at 46th and Fifth,” he said. “We are seeing interest from tenants being displaced higher up on Fifth or from tenants not in the market who want to be on Fifth and get sticker shock.”
On the western side of Bryant Park, transformational retail will soon arrive. There’s the upcoming 7 Bryant Park office building that Hines is developing — along with the reinvented retail at Blackstone’s 1095 Sixth Ave., on the southwest corner of 42nd Street, and 5 Bryant Park, in the former “tweener” area between Fifth and Times Square.
Patrick Smith, executive vice president of SRS Real Estate, who is representing Blackstone, declined to discuss the rumored Whole Foods at 1095 Sixth, but noted that Blink Fitness has just signed for 18,000 square feet on the “ground and down” at 5 Bryant, while Organic Avenue is taking 1,800 square feet. The asking rent for spaces facing the park is $300 a foot, the corner is $400 per foot and 40th Street is $225 per foot, he said.
Jeffrey Roseman, executive vice president of Newmark Knight Frank, is the agent for the iconic Brill Building at 1619 Broadway, which is reinventing its 60,000 square feet of retail. Asking rents are north of $1,000 per foot, he said, whereas a block or two south it is $3,000 per foot. “It’s the same vibrancy and nightlife and hotel and tourists and office buildings,” Roseman noted.
At the upcoming Times Square Edition hotel development at 701 Seventh Ave., there will be roughly 80,000 square feet of retail on six levels. “The retail area is one of the hottest areas of the world and it would be great for any company that wants tremendous visibility,” said Andrew Goldberg, vice chairman of CBRE, who is the agent for the Witkoff development partnership.
The Broadway corridor from Times Square to Herald Square is also a focus of building owners as they upgrade small delis into national retailers and better food offerings. When Urban Outfitters opens at 1333 Broadway between W. 35th and 36th Streets, building owner Anthony Malkin, president and CEO of the Empire State Realty Trust, Inc., believes there will be a huge pedestrian shift. “Other retail will transform along that corridor,” he said.
A new pedestrian survey commissioned by ABS Partners concluded that pedestrian traffic on Broadway between Madison Square Park and Union Square Park is 24 percent higher than on Fifth Avenue.
“We really did not expect such a sharp difference,” said John Brod, partner at ABS Real Estate, which owns 915 Broadway and has 21,000 square feet of retail available. Rents are in the $250 to $300 per foot range on Broadway, whereas Fifth now has asking rents in the $350 to $500 per foot range, he said.
Meanwhile, at the gateway to SoHo, Madison Capital will develop a 30,000-square-foot, six-story building at 606 Broadway for retail and office space. “We wanted to stress the design of the slicing of the site,” said Joe Jacobson, partner and co-founder of Madison Capital, of the Perkins Eastman design; construction will begin in late 2014 and be completed in 2016.
On high-traffic Broadway, national tenants that can afford the steep rents means smaller luxury retailers are focusing on Prince, Spring and Mercer Streets. They may have fewer walkers but there’s the new Balenciaga shop at 148 Mercer St. and the redevelopment of 151 Mercer for Tory Burch.
“They are spending millions to make bold statements,” said Adelaide Polsinelli of Eastern Consolidated of these retailers. Polsinelli is offering a space at 57 Mercer, a k a 453-455 Broome, with an asking rent from $300 to $350 per foot for the 4,500 square feet on the ground, with another 6,000 feet in the selling basement.
“I have interest from restaurants, high-end luxury from Europe, local designers and designers in SoHo who want to come south and get a bigger space and not pay $500 a foot,” Polsinelli said.