By Jeffrey Roseman, EVP and principal
Newmark Grubb Knight Frank Retail
As another year comes to a close, I thought this would be a good time to recap some of the better stories and trending items in the world of NYC Retail.
Madison Avenue, New York City’s only true luxury street and quite possibly the most famous luxury street in the world, has seen a rebirth of epic proportions.
It was only a few years ago that Madison Avenue was the poster child for a world gone crazy.
The financial markets were out of control, and virtually every news story featured an empty Madison Avenue storefront with a “for rent” sign in the window, illustrating the bottom of the market and the end of luxury spending.
Fast forward to today, rents are at an all time high, retail sales on Madison Avenue are sky rocketing, and new retailers such as Varvatos, Canali, Alexander McQueen, Fendi, Mont Blanc and Oscar de la Renta have brought Madison Avenue back to the legendary stature of its past.
The Return of the Upper East and West Side Retail Market
Not that long ago, when a retailer was looking to come to NYC, it wasn’t unusual that their first choice would be to look on the Upper East or Upper West Side of Manhattan, and why not, both these areas always offered the country’s best demographics.
You can count on one hand neighborhoods across the country, with better household incomes, education levels and disposable income levels than the Upper East and Upper West Side possess.
But the city started evolving and major development and re-gentrification took over as did new retail hotspots. Soon areas like SoHo, The Meatpacking District, Times Square, Flatiron and Union Square became the targeted choice for retailers.
Today we are seeing both the Upper East and Upper West enjoy a resurgence of activity as retailers are coming back in large numbers.
Companies like Nike, Reebok, James Perse, Kate Spade, Carlo Pazolini and Vince have helped bring both areas back to being a solid shopping district.
New Zoning Plans and Community Boards
We watched this year what many of us perceive as a very dangerous emerging trend, the continued attempts to put regulations on retailers and restaurants, not only by the city, but also by independent Community Boards.
The Upper Westside was the first to impose regulations on what retailers can go where, as well as put limits on frontage and usages for specific industries.
Obviously, the idea of government having a say on what retailers can go where, is just so wrong in many facets, not to mention dangerous. Part and parcel to this is the rising power Community Boards are starting to wield.
Of course, there is nothing wrong with a Community Board rallying against something in their neighborhood that will alter their quality of life such as night clubs or like establishments, but when they start dictating to what sort of retailers they want… or don’t want, I believe we are only asking for trouble.
Clearly this is something that can pose serious headaches for retailers, developers and brokers alike, if not dealt with head on.
One word can describe the transformation of this area which once boasted retail shops selling girdles, greeting cards and cheap suits, WOW!
The changeover to luxury retail, high-end dining and gourmet markets will compliment the changing face of business downtown.
As Condé Nast changes the profile from government workers to fashionistas, it will open the door to a brand new shopping and dining experience.
Companies like Ferragamo, Burberry, Urban Outfitters and Coach will turn Downtown into a regional shopping district second to none, while restaurants like Parm, Olives and Tartinery will replace the greasy spoon coffee shops.
Shopping Areas Expand
What happens when areas like SoHo, Times Square and Union Square have no vacancy and there are still many retailers who want to be there? Well they have no choice but to stretch!
Over the past year we have seen SoHo expand south, Union Square expand west, and Times Square expand north. While the heart of Times Square continues to be the bow tie, the bow tie only consists of 3, maybe 4, blocks.
There are still so many retailers who are clamoring to get into the Square, so they have all begun scouring Broadway and 7th Avenue from 46th Street all the way to 57th Street.
Likewise Union Square has expanded west, way past Fifth Avenue and SoHo now goes all the way to Canal Street. These areas all have proven their incredible vibrancy and sales results, making it a simple principle of supply and demand, as more retailers come looking daily.
The proliferation of food trucks in NYC is an alarming trend. Over the past year, we have seen more and more trucks clogging the streets of Manhattan, and they are coming as quickly as chains like Starbucks, Chipotle and Potbelly come, with one major exception — they don’t pay rent.
Rightfully so, many of the food chains have started to take umbrage, as they are paying anywhere from $20,000 – $50,000 per month in rent, while the trucks pay nothing.
How can we let a truck park right in front of an establishment selling the same product but cheaper? The City will have to figure out how to regulate this escalating trend better.
All in all, retail in New York City has flourished and continues to be the dominant sector of the real estate market with no end in sight.