(For more retail coverage, click GlobeSt.com/RETAIL.)
NEW YORK CITY-The Real Estate Board of New York's Retail Report findings, which include rising rental rates in almost every portion of Manhattan, come as no surprise to those entrenched in the field. "We're the hottest city in the world for retail," says Henry Goldfarb, executive managing director, head of retail for Grubb & Ellis.
In the past 12 months, the average asking rent rose by 4% to $106 per sf. Bigger gains were seen in the borough's most renown retail streets with asking rents increasing 14% on the Westside to $122 per sf, 8.2% in Downtown to $92 per sf and 7% in Midtown to $137 per sf. Ground-floor asking rents posted even higher increasing in asking rents. Madison Avenue's rent rose 26% to $1,000 per sf, while West 42 Street saw a 50% increase in the last year to $300 per sf.
Contrary to some opinions that the retail sector will slow in the months to come, Goldfarb says while it may stabilize, the industry is not tanking. And in Manhattan rental rates and industry interest just keeps rising. Madison and Fifth avenues have been the most sought-after section for years, but some companies are looking elsewhere. "The retailers are looking for the next up-and-coming area where the rents are lower," Goldfarb says.
He names the Columbus Circle area as the 'up-and-coming' area. Rents in the area have almost doubled in the last year to about $400 per sf. While that might be more than retailers are paying in the rest of the country, if they are coming from Madison Avenue, Goldfarb says they see value in the transaction and see little problem with the rental rates.
Gene Spiegelman, executive director at Cushman & Wakefield, says the Westside from 72 Street all the way down to the Financial District will continue to see increased interest."Generally, Manhattan has become a very active retail environment from river to river. But I think the future is based along Manhattan's Westside from 72 Street all the way to the Battery." He names the recent rezoning of Chelsea and Hudson Yards as factors that have created a live-work pattern in the area.
To both Spiegelman and Goldfarb the Financial District is a future sector to watch. The area's residential and office increase over the last couple years has created a more 24/7 section. Spiegelman says while the area is still empty at night, the 50,000 residents soon to be living there will contribute to the revitalization of the area.
In June, Tiffany & Co. announced plans to open a 7,600-sf store at 37 Wall St. Hermes and BMW have also recently announced plans for Financial District locations. Downtown buildings are attempting to make way for the retail companies. Goldfarb mentioned the New Financial Center, which currently has 180,000 sf of retail space. The building owners are looking to expand the retail potential to 500,000 and secure a big-box anchor tenant for a majority of the space. The remaining facility will be filled in with smaller retail components.
Retailers unknown in the Manhattan market are also looking to cash in. Spiegelman names Spanish-retailer Mango as one such example. Other companies that may have opened a store recently are looking to open a second location. "People don't necessarily come here to do one store." He cites Trader Joes as one concept interested in doing more.
Goldfarb says he has recently seen increased interest from national grocers that wrote off Manhattan years ago due to high rental rates. He is currently looking at opportunities for these companies he couldn't name.
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