New York is a town defined by diversity and disparity. From East New York to the Upper East Side, everyone is here. And everyone wants to come here. Variations in retail rents reflect this rich mixture. Soho rents are so much more expensive than South Street’s. Madison Avenues leases for far more than Midtown. Fifth Avenue in Manhattan is a million miles in pricing from Fifth Avenue in Park Slope. All are defined by the same dilemma of rapidly rising rents. What makes New York incredibly attractive to retailers also makes it incredibly expensive. Sticker shock is common to new entrants to the market.
Retail rents are surging, pushed by high levels of tourism coupled with a prospering local economy. Fifth Avenue, Times Square, and Madison Avenue have historically demanded the highest prices. SoHo has joined these neighborhoods as a prime shopping location for both tourists and locals. The limited supply of available space, especially in the most sought after corridors, adds to price pressure. However, a good broker can guide a client toward the goal of great location.
The REBNY Spring Report notes “Asking rents in Times Square on Broadway and 7th Avenue between 42nd and 47th streets jumped 55 percent to $2,175 psf ” The Real Estate Weekly article “Luxury Retailers Jumping on Soho’s Brand Wagon” of April , 2013 reports that “the famed Fifth Ave strip saw the second largest price growth rise at 15.2 percent, and still is the most expensive retail rent area in the city, with the average asking price hovering around $2,631 psf
A WWD article from May 2013 reports “asking rents for available ground-floor space on Madison Avenue between 57th and 72nd Streets increased 36 percent to $1,325, since the fall.” In SoHo, according to The Business of Fashion’s article, “The Shifting Winds of New York Retail, “the concentration of international fashion and luxury brands is thicker than almost anywhere else on the planet.” According to the Crain’s article from April 2013, “SoHo Joins the Top Tier as Retail Rents Cross $1K Mark,”“SoHo is taking its place alongside Fifth Avenue, Madison Avenue and Times Square as a must-have location for retailers.” The article adds, “For a long time, there were brands there because it was hip and it was sexy, but they weren’t necessarily making a lot of money,’ said Michael Glanzberg, of Sinvin Real Estate”. “Now there are a lot more shoppers who come and really spend, not just a few hundred dollars, but thousands on luxury items.’” The article continues that “rents on Broadway have soared more than 50%, to $756 per square foot” and “on Prince Street between Wooster Street and Broadway, SoHo’s priciest block, rents did better, ballooning 65% to $850 per square foot on average”
With such a low supply and a high demand for space in SoHo, an article in The New York Times from December 2012 reports that “luxury clothing brands that would normally flock to Prince and Spring Streets, are facing little inventory and sky-high rents, and so are now searching out these smaller side streets.” As a result “Rents on side streets such as Wooster and Mercer have doubled from about $150 per square foot to close to $300 per square foot on average”
Other neighborhoods that are experiencing changes in reputation as well as retail rents, include the West Village, Meatpacking District, Chelsea, Herald Square, Lower Fifth Avenue and the Flatiron District. WWD reported in a May, 2013 article that “Bleecker Street between Seventh Avenue South and Hudson Street rose to $540, also an 18 percent increase.” Meatpacking rents escalated significantly “as the neighborhood has completed its transition from blood-soaked industrial use to a 24-hour shopping and nightlife destination,” according to Real Estate Weekly’s article “Pioneers Breaking Newest Ground.” Due to the multitudes of tourists who walk down the High Line, rents climbed “10 percent to $356 psf.”
The Post’s article “$50M Makeover On Tap for Herald Center,” explains that “Macy’s went more upscale [and] The Gap, Forever 21, Victoria’s Secret and H&M moved in nearby and prospered.” The article reports properties in the heart of Herald Square between West 33rd and 34th streets are asking “$1,200 per square foot for roughly 10,000 square feet at sidewalk level” REBNY reports rents “in the Flatiron corridor along Fifth Avenue between 14th and 23rd Streets [where] asking rents also rose 37 percent to $413 psf since spring 2012”, and that “the Flatiron shopping corridor along Broadway between 14th and 23rd streets saw a significant increase in asking rents with a 50-percent-increase to $322 psf since last spring.” In Flatiron North, “asking rents are between $115 and $175 per square foot”
What’s a retailer to do? Few but the largest can pay the price for the more glamorous locations. That’s always been so. There are always alternative blocks and neighborhoods offering reasonable rents with the right traffic mix for any particular product. It’s difficult to chart the course to find such a location at an affordable price, on a block with a desirable co-tenancy. Treacherous waters to navigate even for experienced local retailers. A wrong turn and you’re sucked into a Bermuda Triangle vortex of high rent and low business. Who sets sail without a captain? And that’s what an experienced broker should be; sailing clients s through turbulent seas, straight to the fabulous Fantasy Island of pure profit. Choose one who knows the waters and arrive quickly and safely. Bon Voyage.