Herald Square’s exploding retail market drove an eye-popping purchase price for 150 W. 34th St., the Old Navy store site between Broadway and Seventh Avenue.
The deal closed for $255 million last week, according to sources who also revealed that the Chera family’s Crown Acquisition Group partnered with Starwood Capital Group in the purchase.
The seller was a Greek family.
Old Navy is in the last few years of a 20-year lease at what’s now a four-story, 80,000 square-foot building that runs through to 33rd Street. It has enough air rights to permit a new building of around 300,000 square feet, which could be used for any combination of retail, offices, apartments or a hotel.
However, Starwood vice president Nicholas Doering-Dorival said, “At the current moment, we believe there is considerable upside in the existing retail box. We expect that retail rents and property values along 34th Street will continue to rise.” He declined to comment on the price.
The purchase price works out to about $850 per buildable square foot, a number once unthinkable in the West 30s — but that was before the Far West Side boom, including Hudson Yards.
One source called the deal a “huge retail play. The impetus was what’s happening with sales volume at Herald Square.” Macy’s flagship across the street grosses more than $1 billion annually, the highest of any store in the US.
Victoria’s Secret expanded its flagship and does $100 million annually. H&M signed on as anchor tenant of the redesigned Herald Center because sales at its current stores in the area have nearly doubled in five years.
Reps for Crown and Eastdil Secured brokers Adam Spies and Doug Harmon, who brokered the sale, declined to comment.
Not since I trashed Shake Shack hamburgers a few years ago has anything I’ve written drawn such passionate response as Sunday’s feature about Manhattan’s mushrooming retail vacancies.
But this time, the reaction was nearly all on my side. Reader Amy Laine (@hyperlaine) tweeted, “Kips Bay into Gramercy is a wasteland filled with empty storefront. Someone needs to count and address.”
Even brokers agreed there are too many empties for a city that calls itself a “global shopping mecca.”
There are many reasons for Manhattan’s glut of “available” stores compared with London, Chicago, Los Angeles or Seattle — including a surfeit of new construction, tenants who still expect 1999 rents and an unforgiving retail climate.
But most who contacted me agreed the biggest problem is landlords’ unrealistic expectations.
Menkin Realty Services founder Victor Menkin, who’s represented major tenants and landlords alike in a 30-year career, said, “It [bleeps] me off to see some of my illustrious competitors spewing off about how phenomenal things are, when what you wrote about is a creeping malaise which I don’t think any longer can be ignored.”
Menkin cited a “disconnect” between “landlords’ expectations of rents that are not achievable or sustainable.” He condemned “a contagion of expectations based on press releases” about a handful of ultra-expensive leases.
Cushman & Wakefield powerhouse Bradley Mendelson took a particular interest that three of four retail corners at Third Avenue and 61st Street stand empty, as we pointed out. “I was born at that corner,” Mendelson said. “I lived next door to Isle of Capri [the restaurant that’s the corner’s only occupied storefront] for much of my life.”
He said Third Avenue north of Bloomingdale’s “has always been weak.” He cited the department store’s proximity for giving landlords reason to raise rents too high. “They don’t realize it’s a residential neighborhood,” Mendelson said. “That’s why you see turnover after turnover.”
In the Trump Plaza space at the 61st and Third northwest corner, the former Lobel’s Kitchen, with 3,450 square feet, is on the market for $600,000 a year. While Mendelson wished all involved there well, he said, “A restaurant needs to do $8 million a year for that rent to make sense, and no restaurant that size does $8 million a year.”
Sure, there are new stores in neighborhoods where people once rarely shopped — Nolita, Flatiron, and even FiDi. But “contagion” is there for all to see.
West 14th Street between Ninth Avenue and the High Line in the teeming Meatpacking District is lined with vacancies. On West 48th Street between Sixth and Seventh avenues, eight stores stand dark.
Huge corner spaces stand empty at Fifth Avenue at 41st Street, and at both Sixth and Madison avenues at 40th Street. West 8th Street and many blocks in Flatiron resemble a broker’s show-and-tell.
First-class space newly introduced to the market often requires years to lease up. Blackstone’s 1095 Sixth Ave., with a new green glass facade, has finally found tenants for its avenue storefronts and in “cubes” on 41st and 42nd streets — including Tourneau, Whole Foods, athletic footwear boutique Asics and Equinox fitness.
But should it really have taken nearly three years to lease up at one of the world’s most heavily trafficked corners?