It's hard to stroll around New York these days and not trip over the many obstacles lining the sidewalks. That's good news for real estate and retail, because these aren't just barriers blocking one's way, but scaffolding. And each represents another retail development under way.
The big story here is musical chairs. During the surprisingly robust 2002 real estate season in Manhattan, retail's biggest players negotiated, juggled and danced around one another to take up new outposts. This game should continue with gusto because rents are stable and demand is strong. What's more, expect to see new entrants again. While the war in Iraq caused some retailers to take pause, it's only temporary. Retail plotting will only increase. So what can you expect to pay? Here's a primer of rents and availability for the Big Apple's hottest properties.
A tight market couldn't be more in evidence in Manhattan's three luxury corridors, “Luxury Walk,” “The Golden Mile” and “the Crossroads of Luxury” — Fifth Avenue, Madison Avenue and 57th Street, respectively, for the uninitiated. Here, the rents run from $750 per square foot to $1,200 and the vacancy rate is less than 1 percent.
Nearby are the Upper East and West Side, as well as Midtown. But the neighborhoods couldn't be more different. The former, primarily residential communities, has seen the arrival of stores like Chico's and Northface. Vacancy stands at 3.5 percent and the neighborhoods command rents between $200 and $250 per square foot.
Midtown, in the 40s and 50s between Third and Sixth avenues, banks on convenience — quite literally. Where we once witnessed the coffee wars (Starbucks v. Timothy's v. New World v. Oren's) and the drug store wars, we now welcome the battle of the ATMs. Last year, it was Commerce, Washington Mutual and Fleet duking it out for the most storefronts. This year it's Wachovia, Atlantic, and Independence. Rents are $250 to $350 per square foot and vacancy is 2 percent.
Who cares for convenience when couture is calling? New York's newly fashionable Flatiron District is home to Arden B., Aerosoles and Armani A/X, joining neighborhood veterans Paul Smith, Kenneth Cole and Coach. Molton Brown is soon to arrive, care of London. The rents are $150 to $225 per square foot and vacancy is practically nil.
Indeed, those rents are pretty fashionable compared to sky-high Soho. A scant year ago, rents were as much as $500 per square foot. But the prices south of Houston have come down — to the $250-$350-per-square-foot range. When the tourists left post-9/11, so did Soho's raison d'etre. For some retailers, that also spelled opportunity. Crate & Barrel and Levi's just entered the neighborhood, soon to be followed by a Williams Sonoma Superstore and Diesel.
Greenwich Village, both east and west, is the renowned training ground for the new cafes and chi-chi boutiques that make in-the-know New Yorkers salivate. Rents are $150 to $200 per square foot (and zero vacancy), which seem quaint compared to other Manhattan neighborhoods, but are actually huge compared to the hyper-chic Meatpacking District right next door. This neighborhood is a definite destination, as Jeffrey, Stella and Alexander (as in McCartney and McQueen, thank you very much) can attest. The rents are $75 to $100 per square foot with plenty of empty storefronts, a good target area for the hip, space-hungry retailer.
Sandwiched among these neighborhoods, Chelsea is the sleeper. Perhaps because it has a split personality. It's returning to its former glory as an arts Mecca, with galleries and museums springing up everyday — and equally artistic retailers, such as Balenciaga and Comme des Garçons, to match. The very residential neighborhood has also converted its Lady's Mile buildings into a big-box fantasia, with Bed, Bath & Beyond, buybuy Baby, Barnes & Noble and Best Buy competing for shoppers. Rents are $100 to $150 per square foot, and more space will become available.
Who Faith Hope Consolo
Vice chairman of Garrick-Aug Worldwide Ltd.