Manhattan Retail Space Success Off the Charts

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At a time when retail real estate is still suffering in many parts of the country and recent holiday sales were disappointing, on the isle of Manhattan, the vacancy rate for retail real estate is practically non-existent in certain "key areas," says Jeffrey D. Roseman, executive vice president at Newmark Grubb Knight Frank Retail, in New York.

These "key areas" that Roseman talks about-- SoHo, Fifth Avenue and Madison Avenue, to name a few-- are  places where demand outweighs the supply, says Roseman. "Everybody wants to be in the city, every chain in the entire world," he says. In the last year or two, Topshop, a UK-based retailer that caters to the high-fashion, low-priced, youth clothing market, opened in Manhattan, while a few other similar deals are in the works, says Roseman.

Also, relative newcomers to Manhattan include other inexpensive, but fashionable, clothing chains like Fred Perry, a British import, the Uniqlo Co., a Japanese-based clothier, Canadian-based Joe Fresh and Zara Home. All of these retailers have put down their markers in Manhattan recently, with a few outlets for these brands in the most expensive retail corridors.

And speaking of the most expensive retail streets in Manhattan, on Fifth Avenue, between 49th and 59th Streets, retail rents run roughly $3,000 per square foot; in Times Square, $2000 per square foot, the Upper East side on Third avenue commands $250 per square foot and the area near the Grand Central Terminal, has retail rents of about $300 per square foot, Roseman reports.

Of course, there are retail sub-markets in Manhattan that have less expensive rents, but virtually every retail corridor is bustling-- from Greenwich Village to the Upper East side and many in between, says Roseman.

According to CBRE's third quarter 2012 MarketView report for Manhattan, the latest such report available, asking retail rents have risen rapidly. For example, on Fifth Avenue, between 49th and 59th Streets, asking rents increased by 18.8% since the second quarter. These giant leaps in retail asking rents from quarter to quarter are not unusual, says Andrew Goldberg, executive vice president at CBRE in Manhattan. The fourth quarter report, due out in the next couple of weeks, is not expected to show any change in this trend, he says.

At the lower end of the spectrum, according to the CBRE report, were Downtown retail rents, on Broadway from Battery Park to Chambers Street. Here, the asking rents were a mere $213 per square foot, according to the CBRE report.

"The primary catalyst for the surge in asking rents was the addition of several high-priced spaces that were brought to market," according to the CBRE report. In addition to the new supply, select landlords raised their prices on existing available spaces in prime corridors, it said. Herald Square and Downtown experienced the largest quarter-over-quarter increases of 30% and 28%, respectively, in the third quarter, according to CBRE.

"While there are empty stores in Manhattan, on the whole, the city (Manhattan) is absolutely flourishing," says Roseman.

"Virtually every low rise building in the city is either in a phase of development or slated for development," says Roseman. "There are no more gas stations or empty parcels in Manhattan," he says. If there is a building with one or two stories in Manhattan, and especially those on a corner in a prime retail area, someone has designs on it," he says.

And as if to illustrate' Roseman's point, one of the spaces where the Swedish clothing retailer H&M, recently opened a store, had been a bank and an office space before it was retrofitted for retail, says Goldberg. And at 1535 Broadway, the entire building will be reconfigured, making new spaces, which have alternate uses," he says. "We are seeing values justifying the redevelopment of properties," says Goldberg.