THE SPACE RACE: EMERGING NYC AREAS CAN STILL BE FOUND
Byline: Janet Ozzard
NEW YORK — Where next?
If SoHo is tapped out, Madison Avenue’s waiting list is longer than the line to get into Lotus and the meatpacking district is still a little raw, where can a hopeful retailer expect to put down roots in New York’s roiling retail market? Unlike those Wall Street graphs, real estate’s spiking rents show no sign of plummeting. Location, location, location is the predominant mantra for no-risk investors, so proven neighborhoods like Madison Avenue and SoHo remain important. But for entry-level retailers, there are a few neighborhoods on the cusp, including NoLIta, the West Village, the meatpacking district and the Lower East Side.
“The truth is, there are no bad neighborhoods in Manhattan, because the boundaries keep getting pushed out farther and farther,” said Suzanne Hebron, senior vice president and managing director for the commercial department at Corcoran. “You find chic dress shops and coffee bars and art galleries a block away from streets you wouldn’t want to walk down.” While Madison Avenue is still “the gold coast, the sure thing,” Hebron said she likes the Lower East Side — Ludlow, Orchard and Stanton Streets, for example — where rents are still around $30 to $40 a square foot.
“We’re seeing what I would describe as a bit of consolidation,” said Stephen Stephanou, vice president at HGCD Retail Services LLC. “If there really is going to be any long-term softening, well, landlords in New York are pretty tough characters and they would rather, in many cases, keep the building unoccupied and hold out for better rents.”
One of the drawbacks of going into an emerging neighborhood, said executives, is that the emergence often takes a while. That can be a treacherous strategy for small companies, who might not have the wherewithal to stick around longterm in an unprofitable location. “Do we really still think the meatpacking district is hot?,” asked Joel Isaacs, president of Isaacs & Co., whose firm has handled deals here for numerous French and Italian luxury goods companies including Prada and Jil Sander. Frankly, say executives, aside from Jeffrey New York and a few other small stores, the neighborhood is dirty, not exactly convenient and a little dicey at night.
“It’s evolving slowly, but then it took SoHo years to evolve,” said Isaacs. “I have walked around and looked at locations with some apparel retailers, but I think right now it’s more exciting for restaurants. There’s Pastis and Markt, and Jean-Georges Vongerichten is opening a big restaurant there. But I’m not seeing fashion companies, although I know people have been looking.”
Jeffrey New York is still the fashion pioneer; the multibrand designer store is going into its third year on West 14th Street. But Agnes B. has reportedly not re-signed the lease for the women’s portion of its prime SoHo store, and is said to be looking for a meatpacking-neighborhood boutique. Fashion publicity powerhouse KCD moved to the area a couple of years ago, joining p.r. firm KRT, and Auto, a hip housewares store, is also a neighborhood fixture.
And while West Chelsea, north of 23rd Street and west of Ninth Avenue, is developing along the lines of a latter-day SoHo — industries are being supplanted by galleries, which in turn get supplanted by luxury retailers — Isaacs said it’s in the earliest phase of evolution. Although the Lincoln Town Cars that crowd the curbs for the occasional Damien Hirst opening at Gagosian might seem to be bringing eager Gucci and Prada customers, those fashionistas cluster elsewhere to shop.
“I see the grooviest looking people here on the weekends, but they’re not shopping,” said Isaacs. “They’re going to galleries.”
The West Village, on the other hand, is definitely feeling a breath of change, spurred mostly by Marc Jacobs’s move to sign a lease for a signature women’s store next to his men’s store at 403 Bleecker, near West 11th Street. Now, strollers who pick up their cupcakes from Magnolia Bakery or are on their way to a meal at Paris Commune — a favorite dinner spot of Jacobs’s president, Robert Duffy — will be able to buy both lines. The Marc Jacobs store in SoHo, as reported, will be converted to carry the designer’s secondary line, Marc by Marc Jacobs.
Rents in the West Village run about $100 a square foot and up, said Isaacs. There’s great weekend traffic and plenty of local residents to keep the streets busy.
But there are drawbacks, said Caroline Banker, executive vice president at Douglas Elliman’s retail and office group.
“It’s charming, it has character, but the spaces are tiny,” she said. “You’d have trouble finding anything over 800 square feet. That doesn’t make sense for any major designer or flagship.” SoHo is still important, but as a showcase for European and American luxury brands rather than the multibrand stores or more avant-garde designers.
“Areas like Greene between Prince and Spring have such great critical mass,” said Isaacs. Rents were skyrocketing as high as $350 a square foot, but “they’ve begun leveling off somewhat, and landlords are a bit more flexible, although tenants still have to have quality credentials.”
“As much as people like to knock SoHo and say it has become a big mall, there still is a lot of diversity when you go up and down the side streets,” said Stephanou. “We get very jaded as New Yorkers because we have such high expectations.”
Lafayette Street below Houston, for many years the province of restaurants like Indochine and home furnishings stores like Urban Archaeology, is attracting more fashion tenants who get the walk-by traffic of shoppers drifting across Broadway from SoHo on their way into NoLIta. There’s a high density of luxury apartments and new hotels being built by Andre Balazs and Ian Schrager.
“Larry Everston [owner of the trendy footwear chain Tootsi Plohound] has great instincts, and he is going into 273 Lafayette,” said Banker. “The exposure on Lafayette is far superior to the side streets, and the spaces can accommodate a major national retailer.” Rents there are around $100 per square foot, or around a third of the going rate for prime SoHo space, she said.
Stephanou has mixed feelings about NoLIta. “Elizabeth Street sure is groovy, and there are always people hanging out at Cafe Gitane, but are they spending money on some esoteric edit of a high-end shoe line? The stores are very, very small so someone who needs to make a big statement would have to be on Lafayette.”
A high-end European footwear retailer was seriously looking in NoLIta, he said, but when quoted rents started hitting $85 a square foot, “they backed out. That’s a significant amount of money for a foreign tenant who has to come up with a lot of financing or a letter of credit.”
Stephanou, who works with clients such as Cole Haan and Coach, has been looking in the Flatiron neighborhood and watching with interest as companies like the Estee Lauder-owned British beauty brand Jo Malone open there.
“We may see some seepage to Broadway, away from Fifth Avenue,” said Stephanou. Restaurants, which bring the all-important afternoon and evening traffic to neighborhoods, have been piling up in the lower 20s, he said, and rents are in the $100-to-$125-per-square-foot region. Depending on the tenants who come in to major, empty spaces around Union Square, that area could also become a new shopping destination.
As for New York’s neglected West Side, Stephanou thinks over the next few years the new Columbus Circle project and the renovation of Lincoln Center could be a much-needed kick in the pants, but given the quieter, residential feeling of the neighborhood and the size of the available spaces, those tenants are more likely to be national chains — along the lines of the Barnes & Noble that is already there — than small, hip design-intense stores.
“National retailers still want Broadway locations,” he said. “The Gap, Banana, Coach. Those are the meat-and-potatoes stuff. You’re going to see the delis turning over and going into soft apparel.”