DOT-COMS INVADING FASHION CENTER TURF, FORCING RISE IN RENTS
Byline: Arthur Friedman
NEW YORK — Here come the techies, and with them, the metamorphosis of the fashion center.
The personality of the district — which includes a legacy of entrepreneurial creativity and competition and the garmento — is slowly giving way to the new vendors and merchants of the 21st century: the Internet crowd.
A year after fashion employment in the district fell below 50 percent for the first time since its creation in the early Thirties, a steep decline continued in 1999. Direct fashion industry employment dropped another 5 percent last year to 44.6 percent of total jobs, and that trend is expected to continue, according to executives at the Fashion Center Business Improvement District.
Gerald Scupp, deputy director of the FCBID, told the organization’s annual meeting last week that the biggest drop in jobs came from manufacturing, down 9.5 percent last year to 24,025. Wholesale employment in the area dropped just 1 percent to 21, 272 for the year.
While this might not be good news for the core sector, property owners have nothing to complain about.
As Scupp said, “The district is not just revitalized, it’s booming. With over 500,000 square feet of space leased in the past year, vacancies are down to about 6.5 percent, which is, for all intents and purposes, practically nothing. Most of the new leasing has been to the service sector, with the largest area of growth appearing to be with the so-called ‘dot-com’ companies.”
The vacancy rate has been in a steady decline for the past few years, according to the FCBID’s 1999 Economic Profile report, down from 7.7 percent in 1998, from 8.7 percent in 1997 and 10 percent in 1995. Accordingly, rents are up about 15 to 20 percent from a year ago with virtually no concessions being offered.
Rents have risen across the board to an average $30 to $32 per square foot. In office buildings, they run from about $30 to $45 per square foot for office and showroom space. In loft buildings, the rents average $18 to $22 per square foot for manufacturing spaces and $25 to $27 per square foot for office and showroom facilities.
The impetus for the rent hikes has been the relatively recent influx of non-fashion firms to the district, said Barbara Randall, executive director of the FCBID. As the Economic Profile report states: “The market in the Fashion Center has been described by area brokers as red hot, and by some as hyperactive.”
In recent years, firms like the Bates Worldwide advertising agency, which moved into 498 Seventh Avenue last year, occupying 200,000 square feet, as well as other advertising companies, computer technology firms and, most significantly, the health, legal and educational service sectors have taken residence in the district. They have replaced the sewing machine operators, salespeople, pattern makers and rack pushers who gave the district a distinct flavor for much of the 20th century.
Late last month, iVillage.com announced it was taking more than 100,000 square feet in 500 and 512 Seventh Avenues, and Designeroutlet.com and About.com have recently signed deals for offices in the district.
“From a real estate point of view, it’s good news for the district because buildings are full and rents are back up after being stagnant for so many years,” Randall said. “But it’s also telling about the [fashion] industry, which has shrunk in the amount of manufacturing in the district and the number of vendors in the business. You’re still going to have major showrooms here, but the number of vendors is not going back up.”
The drop in fashion industry employment is not limited to the garment district, however. According to the report, in New York City, employment in textile and apparel manufacturing and apparel wholesaling fell 6.3 percent to 124,300 last year and is down 18.7 percent since 1991. Similarly, in Manhattan alone, fashion industry employment declined 6 percent to 80,500 in 1999.
With the influx of new industries to the area, Randall said: “We recognize the shifting tenancy in this district is not an anomaly and needs to be accounted for in our programming. But we also recognize that there is a cachet and intrigue, perhaps more than ever, with fashion and designers. As a result, the marketing programs that we have retained going forward will have broad tenant and visitor appeal, such as the Fashion Walk of Fame.”
As reported, the first eight designers for the Fashion Walk of Fame — Geoffrey Beene, Bill Blass, Rudi Gernreich, Halston, Calvin Klein, Ralph Lauren, Claire McCardell and Norman Norell — will have plaques installed on the sidewalks of Seventh Avenue. Ground will be broken in the next few months for the project.
Randall noted that sanitation services have been extended to include weekends through a contract with Atlantic Maintenance, while crime in the district continues to drop. In 1999, overall crime dropped 9 percent in the district, including a 29 percent decline in robberies and a 26 percent decrease in grand larceny (person).
The Fashion Information Kiosk on West 39th Street and Seventh Avenue now offers information for all visitors to New York in addition to the business-to-business information that’s always been its focus.
Phase one of the streetscape improvements program has been completed and phase two should get under way soon, Randall added. It will include decorative bishop’s-crook lighting on the side streets, curb cuts and building facade lighting.
The area, known in its first 60 years or so as the Garment District for its preponderance of apparel manufacturing and wholesaling companies, took on the moniker of the Fashion Center in 1993. That’s when property owners created a Fashion Center Business Improvement District — generally encompassing the neighborhood west of Fifth Avenue and east of Ninth Avenue, from West 35th Street to West 41st Street — when it fell on hard times as importing surged and domestic sewing jobs started to disappear. It was a part of a citywide program initiated by business owners to improve neighborhoods, augmenting city services. Some of the other districts are the Times Square BID and Grand Central BID. The districts get their funding from an excise tax on buildings.
The FCBID’s seven-year mission has been successful in cleaning up the neighborhood in terms of crime and sanitation, and promoting its main industry. And the fashion center remains the home of the apparel industry’s major makers and big brands, but it might soon have to undergo another name change.