Two related plans that would spur residential development and create pedestrian-only zones and quasi-parkland in Hudson Square seem to mesh nicely and are far likelier to come to fruition than to fall by the wayside.
Trinity Real Estate, the real estate arm of Trinity Church, which owns much of the land in the area and whose won-loss ratio is extremely favorable, has been pushing for a rezoning that would accommodate residential development there. And now, a lower Manhattan business improvement district has announced its intention to reconfigure the landscape outside the mouth of the Holland Tunnel, with auto-free zones and tree-lined plazas – a plan that the city’s transportation commissioner says includes “promising concepts that could lead to safer streetscapes ….”
Meanwhile, the area’s recent trend lines have been up, with the historically off-the-radar sub-market attracting more value-conscious office tenants looking for an experience similar to those in nearby SoHo and Chelsea – startups and artists’ studios – but at far lower price points.
Who is the likeliest beneficiary of increased office leasing, the likelihood of increased residential development and the probable creation of auto-free plazas? It figures to be the retail market.
The profitable ownership of retail property and the successful leasing of it – from landlords’ as well as retail tenants’ perspectives – is largely driven by traffic and activity. Where there is robust office activity, Monday-through-Friday daytime retail is generally successful. Where there is residential density, night and weekend retail tends to prosper. Where office activity and residential density intersect, it is a perfect recipe for around-the-clock retail activity and increased revenues and property values. That is the likeliest scenario at Hudson Square, which sits north of Canal, south of Houston, west of Sixth Avenue and east of the Hudson River and which, until recently, didn’t even have a name.
There are challenges, of course, to residential and retail activity, but those challenges are reflected in current price points for acquiring – through purchase or lease – land or retail space in Hudson Square and likely will be more than offset by opportunity.
The most formidable challenges include the Holland Tunnel itself, and all the truck traffic the tunnel brings. (Truckers favor the Holland because it is the gateway to Canal Street, which is a toll-free feeder to Brooklyn.) But some New York residents want an easy way out of the city, to New Jersey or other locations to the west, for weekends and vacations. A more polished Hudson Square that features pedestrian zones and plazas should attract young single professionals and unmarried couples – two key demographics for retailers – looking for reasonably priced, spacious housing by or near the river.
Another challenge is more subtle. Unlike some formerly dicey neighborhoods that became more fashionable – the Meatpacking District, for instance, and Hell’s Kitchen – Hudson Square never had a reputation as a danger zone. Then again, until recently, it hardly had any reputation at all – a nameless, out-of-sight and out-of-mind, off-the-radar market that never had its own identity, unless you count the numerous printing businesses that occupied it for years. But times and fashions change and, with a boost from Trinity, the BID and the city, Hudson Square is poised to take off. Some savvy owners and investors who have successful track records of being in front of trends and waves have already added Hudson Square properties to their portfolios. Even with commensurate increases in pricing, others are likely to follow.
This isn’t mere speculation. As brokers who represent landlords and tenants in retail leasing transactions and sellers of retail space, we at JTRE have seen ample precedent for successful retail investment and leasing activity in markets that feature pedestrians-only zones. Times Square and Union Square are two retail hotbeds that have benefitted immensely from the creation of auto-free zones. And on the southeastern tip of Hudson Square, where we recently won the exclusive retail leasing agency at 393 Canal Street, a 3,000-square-foot space with 100 feet of frontage, we have already experienced significant interest from well-known brands, and that is prior to the kickoff of our marketing campaign.
It is a fact that New Yorkers do not shop like their country cousins. City-dwellers don’t drive as much, and few drive to work. Parking is difficult, to say the least. New Yorkers shop at their convenience – in the evenings and on weekends near where they live, and during the workday near their office space. But surely as the sun rises in the east and the ocean rushes to the shore, retail follows where office and residential activity have led.
What will this mean for Hudson Square? Not big box – it’s the wrong product for this neighborhood. In short order, however, we expect to see the little guys paving the way for the big guys: Starbucks, for instance, planting its flag alongside sandwich shops, national food chains arriving to cater to the lunch and dinner demands of workers and residents, and then, finally, big-name users of larger space once the neighborhood is fully established as a retail center.
Jack Terzi is founder and principal and Maurice Sasson is director at JTRE, a full-service, boutique commercial real estate firm headquartered in New York City, with an emphasis on leasing and sales of retail property.