Take another look at SoHo.
This story first appeared in the March 7, 2017 issue of WWD. Subscribe Today.
The way properties there are being marketed suggest greater flexibility in choosing tenants on the part of landlords. Pop-ups, carved-up locations for dual tenancies and flagship formats for big brands are broadening the neighborhood’s appeal and to some extent diluting the concentration of luxury.
Recent openings include Nike, Zara and Vera Bradley, and the string of pop-ups include Lands’ End, which operated through the holiday season; Sennheiser, a German headphones and microphone manufacturer that will remain open at least through March; Glow Studio Downtown for Korean beauty products that will be open though March, and Everlane at 415 West Broadway.
Veronica Beard signed a lease for 78 Greene Street and is opening soon; Tory Burch is building a store at 151 Mercer; Shinola will open at 101 Prince Street in April; Sketchers is moving into 530 Broadway; Dolce & Gabbana’s store on 155 Mercer Street is being revamped, and Loro Piana is said to be scouting the neighborhood for a location.
Among the recent upscale openings in SoHo are Canada Goose; Ted Baker, which relocated from Grand Street to Wooster Street; Simone Rocha; Thakoon, and Fendi which took a permanent spot at 104 Greene Street after being in pop-up situations.
Recent closings include Old Navy, Tommy Hilfiger, Scoop and Eastern Mountain Sports.
High vacancy rates, high rents and an awareness that retailers have become very selective in site selection amid store traffic declines and accelerating online shopping have impacted the neighborhood and encouraged landlords to create new possibilities for shopkeepers.
Related Companies has a property under construction at 300 Lafayette Street, on a busy corner of Houston, which it characterizes as “a truly unique flagship retail opportunity for anchor retail tenants over 10,000 square feet.” Formerly a gas station, 300 Lafayette has 300 feet of frontage along Crosby, Lafayette and East Houston Streets, and three floors. Related said a retailer could open for business there in the third quarter of 2018.
Pearlmark Real Estate Partners has a 20,750-square-foot space at 63 Wooster Street that it believes can be shared by two tenants, or provide for a single flagship.
“We think the side streets are gaining popularity with luxury retailers and some other retailers looking for spaces,” said Beth Rosen, executive vice president of RKF, the retail leasing and consulting firm, which is marketing 63 Wooster. The site was formerly occupied by Anthropologie, and was known as 375 West Broadway, but RKF is using the Wooster Street address as a hook to cast greater cache. The property has the advantage of extending from Wooster to West Broadway and providing entrances on both sides.
Rosen said cotenancy on Wooster is “phenomenal” and that luxury brands are making such “secondary” SoHo streets their first choice, though 63 Wooster could also be ideal for an art gallery, an experiential use or an upscale multibrand retailer, she added.
She sees leasing activity in SoHo as on the rise and believes that the completion of lower Manhattan’s two major projects, Westfield World Trade Center and Brookfield Place has helped shift some attention back to SoHo, which is bordered by Avenue of the Americas and Broadway, and Canal and West Houston Streets. The neighborhood continues to be perceived as among the world’s most desirable and hip, trend-setting venues for retailers, given its local and international tourist traffic, mix of lofts and expensive apartments, chic restaurants and galleries, and seven-day-a-week traffic.
According to Rosen, there were 58 retail lease signings in SoHo in 2016 versus 27 in 2015. “SoHo went through a period of high availability and not necessarily all of that [was] vacancies. But the actual velocity of leasing improved in the past year. It’s not everyday that a new deal like Nike gets done,” Rosen said, referring to the five-story, 55,000-square-foot Nike flagship opened in November at 529 Broadway at Spring Street. “SoHo is very active.”
Not everybody agrees.
“The deal-making is spotty,” observed Gene Spiegelman, vice chairman, retail services, North America, for Cushman & Wakefield.
According to Cushman & Wakefield’s statistics, SoHo rents declined 2.4 percent to an average ground floor asking price of $528 per square foot in the fourth quarter of 2016, from $541 per square foot in the fourth quarter of 2015. The highest rent was $1,500 per square foot at 119 Spring Street. The lowest rent was $127 per square foot at 310 West Broadway. The average store size was 3,143 square feet.
The availability rate increased slightly to 21.3 percent in the fourth quarter, from 20.7 percent in the year-ago quarter.
“Rents have to come down before you see material increases in leasing velocity, though some spaces will always command more attention than others,” said Spiegelman. So while the spottiness isn’t across the board, Spiegelman sees in SoHo a lingering “imbalance between supply and demand.” The vacancy rate and demand for space has been impacted by retailers resetting “their brick-and-mortar and e-commerce equation,” Spiegelman added.