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Retailers are in an empire state of mind.
This story first appeared in the May 20, 2013 issue of WWD. Subscribe Today.
New York topped the list of the 15 hottest cities for fashion retail openings last year in a survey by the Location Group in Zurich. Based on the number of new store openings in 2012, the city captured the top slot with 71 new fashion stores.
The strong demand for real estate in New York shopping corridors has given landlords the confidence to raise rents. The 52 million tourists who visited last year — the most in the city’s history — have added to the allure. Last month the city’s unemployment rate dropped to 8.4 percent, its lowest level in four years, which bodes well for the economy.
Increased office occupancy and high-end residential development are creating demand for better shopping options. Some retailers are realizing that there are more potential distinct markets in Manhattan for a rising brand than simply the East Side, West Side, Midtown and Downtown. For example, the World Trade Center and Brookfield Place in the Financial District are bringing a total of 615,000 square feet of retail space to the market. In addition, the Fulton Street Transit Center will have 70,000 square feet of upscale retail space to fill, and the South Street Seaport is looking for tenants.
Hudson Yards, the ambitious redevelopment project on Manhattan’s far West Side, will create more than 1 million square feet of retail space, while Youngwoo & Associates is designing and developing Pier 57 with 425,000 square feet of retail space.
“New York City is like another country,” said Jeffrey C. Paisner, partner in Ripco Real Estate. “Nowhere else in the country are you seeing real estate values and prices accelerating like they are in New York. There’s an enormous amount of tourism and an enormous amount of local wealth. From a demographic point of view, the consumer base is ready, willing and able to consume. There’s also the supply-and-demand factor.”
Demand has been outstripping supply on many prime shopping thoroughfares. That accounts for the average ground floor asking price of $3,052 a square foot on Fifth Avenue between 49th and 59th Streets, according to a spring survey by the Real Estate Board of New York.
Still, those that want marquee visibility say Manhattan is worth the price. “It’s an international hub,” Joe Fresh founder Joseph Mimran said of Manhattan. “It’s almost a country in its own right, from a retail perspective. We knew New York would be a gateway to the world and provide us with exposure to local and international consumers.”
Joe Fresh in 2011 opened its first store outside Canada in the Flatiron District. “New York is a media hub,” Mimran added. “It’s one of the most competitive retail markets in the world. If you can stand out in this market, it bodes well for international exposure.”
Besides the Flatiron District, Joe Fresh operates stores on Fifth Avenue and 43rd Street, and on Madison Avenue. Each neighborhood has a different character, said Mimran. “We’re interested in expanding across New York City and are exploring new opportunities from SoHo to Brooklyn. There are many other retail opportunities with great potential, especially downtown, with the new World Trade Center.”
“Each of H&M’s 11 Manhattan locations has its own unique character,” said Daniel Kulle, president of H&M North America. Stores such as the flagship at Fifth Avenue and 51st Street and units in SoHo, Herald Square, The Shops at Columbus Circle and Penn Station cater to local and tourist traffic, while units on 125th Street, Lexington Avenue at 86th Street, and Fifth Avenue and 18th Street “serve more of a local customer base.”
H&M plans to open three stores in the next year, including its largest unit in the world at 589 Fifth Avenue and stores at 4 Times Square and Fulton Street. “We believe in the continued potential of New York,” Kulle said. “Although we don’t have plans for the Meatpacking District, Lower Manhattan, the Bowery, Hudson Yards, The World Trade Center or Brookfield Place, we would not rule them out for the future.”
“There’s been a seismic shift in terms of new leasing opportunities along the West Side,” Paisner said, citing the World Trade Center and Brookfield Place downtown, and the Meatpacking District with the Whitney Museum opening and the redevelopment of properties along the High Line extending northward.
Hudson Yards will bring “an interconnectedness to the West Side,” he added. “There’s tremendous energy and infrastructure coming to the West side. The 7 train will be extended.
“There’s not enough real estate for all these people,” Karen Bellantoni, executive vice president of Robert K. Futterman, said about the number of retailers looking for space on the busiest streets. “Times Square inventory is very limited, the Flatiron is very limited and SoHo is very limited.”
Population: 8.24 million
Population change: +1 percent (from 2010)
Population projection: 8.69 million by 2020
Per-capita income: $31,417 (median household income: $51,270)
Disposable income: $43,524
Key industries: Finance, media, entertainment, tourism, legal, telecommunications, fashion, trade
Fast-growing neighborhoods: Battery Park City, Manhattan; Charleston/Richmond Valley/Tottenville, Staten Island; Morrisania/Melrose, Bronx, and Bedford-Stuyvesant, Brooklyn
Major development projects: Hudson Yards, World Trade Center, World Financial Center, Whitney Museum (Meatpacking District), Willets Point redevelopment, last leg of the High Line
HOT SPOT: THE BOWERY
An influx of upscale housing on the Lower East Side has made the Bowery attractive to certain retailers.
“There’s some very expensive apartments,” said Karen Bellantoni, executive vice president of Robert K. Futterman, “and restaurants filling in. It’s made the neighborhood extremely desirable to live in. It’s the last little bit of New York that has real New York flavor. ”
John Varvatos and Blue & Cream were early settlers in the neighborhood. Muji recently unveiled a store on Cooper Square.
Emerging neighborhoods such as the Bowery are considered to be distinct enough to support brands with existing stores in as close proximity as SoHo. For example, Curve operates a flagship on Mercer Street and will unveil a store on Bond Street in the summer. Intermix is adding a unit at 332 Bowery to its roster of stores on Madison Avenue, Fifth Avenue, Columbus Avenue, Prince Street, Bleecker Street and Washington Street.
“You lose a little bit of the tourists on the Bowery,” Bellantoni said. “But the rents are cheaper.”