By Liana Grey
The blocks surrounding the Hudson Yards site are often considered Manhattan’s last retail frontier. So when TF Cornerstone built two rental towers on 37th Street, near 10th Avenue, the development firm included space for seven shops on the ground floor.
“We just did a deal with Ark Restaurants,” said Steve Gonzalez, manager of retail leasing at TF Cornerstone. “We think it’s going to be a nice anchor for the neighborhood.”
The rest of 505 West 37th Street’s retail spaces are fully leased, and will soon be home to two event spaces launched by the owner of Studio 450 and other party venues throughout Manhattan. Down the block at 455 West 37th Street, a Duane Reade and Jenny’s Marketplace, a 20,000 s/f deli, provide basic necessities to residents of the two buildings, which have a total of 1,200 units.
“We were looking to try and get a supermarket in the 10,000 square foot space where Ark is,” said Gonzalez. But when they were approached by the restaurateurs, who own big-name establishments like Bryant Park Grill and Sequoia, they couldn’t pass up on a deal.
“From my experience working with developers, you really do want to add value to the residential condos with great retail,” said Lori Ordover, director of sales and leasing at the development firm Africa Israel.
At 20 Pine, a condo conversion in the Financial District, one of several ground-floor storefronts has been leased to Bright Horizons, a daycare center serving children six weeks to six years old. “It’s a large facility,” said Oldover, who is in talks with two additional tenants, and hopes to complete leasing activity within the next year. “They have a lot of different programs, like summer camp.”
A handful of 20 Pine residents drop off toddlers on their way to work, as do financial services workers living elsewhere in the neighborhood. Word of the facility has even spread to Wall Street commuters from Brooklyn.
“You have people starting to live down there; you think of what services are most needed,” Ordover said, recalling a New York Times article that nicknamed the neighborhood the Diaper District. “So many young families are moving into the area.” Man Power, a recruiting agency targeting Wall Street hopefuls, recently opened in the building as well.
In parts of New York long populated by office buildings or factories, retail space allows developers to build residential neighborhoods from scratch – and generate income from quality tenants eager to tap into an ideal market.
“They’re a captive audience,” TF Cornerstone’s Gonzalez said of luxury buyers and renters in under-retailed areas, who have high levels of disposable income but few convenient places to shop.
When Rockrose Development built a master-planned community of rental towers on the Long Island City waterfront, where Pepsi once operated a factory, the company followed a similar path as TF Cornerstone. “I wanted to bring in the butcher, the baker, and the candlestick maker,” joked Patricia Dunphy, senior vice president of Rockrose. “In New York, that translates to beauty, groceries, and a wine shop.”
The owner of a nail salon, one of few retailers thriving near the waterfront before Rockrose arrived, opened a second shop, Emily’s Salon and Spa, in the master-planned community.
To fulfill demand for basic necessities, Rockrose brought in a Duane Reade, and insisted that the pharmacy install concrete flooring rather than linoleum tiles. “It was Duane Reade’s first store that really looked fabulous,” said Dunphy. When the chain underwent a citywide makeover last year “that became their prototype,” she addded.
Dunphy also reached out to a pair of entrepreneurs, one of whom owned the grocery chain Amish Market. The resulting venture was Food Cellar.
“It’s like a mini-Whole Foods,” said Dunphy. The owners even installed the same cabinets used by the national chain, prompting Dunphy’s teenage daughter to exclaim, while browsing the store’s displays of cheese and organic produce, that it had “stolen Whole Foods’ ideas.”
Elsewhere in the complex, at several rental buildings that were eventually sold to TF Cornerstone, retail spaces filled up with additional New York essentials: a wine shop and a restaurant.
The owner of Blue Streak Wines and Spirits, an attorney from the neighborhood who dabbled in wine tasting as a hobby, managed to survive several “bleak winters” during the recession after the complex opened, Dumphy said.
A high-end liquor store is “what people want downstairs,” said TF Cornerstone’s Gonzalez, who began overseeing retail activity when the buildings traded hands.
A local spot to socialize was also in demand. So two brothers, whose parents own a Chinese restaurant near the United Nations headquarters, branched out and launched Shi, an Asian fusion joint.
“We hope our restaurant draws people from everywhere,” said Gonzalez. Already, customers venture in from as far away as Westchester County on Wednesday nights, he said, when the restaurant hosts karaoke parties. Skinny’s Cantina, a Mexican restaurant that will be owned by the brothers, is also in the works.
“We decided not to open a second restaurant right away, because we didn’t want to kill Shi,” Dunphy said. “We didn’t have enough residents to support two restaurants.” Since then, the community has grown to the size of a small town, with over 2,000 residents.
Building a retail scene from the ground up, Dunphy explained, was a slow and methodical process. “You have to have a long-term vision,” she said. On the Long Island City waterfront, that meant signing on a mix of upscale chain stores and boutiques.
At Court Square, a mixed-use project Rockrose will soon be developing near Jackson Avenue, in the heart of Long Island City, Dunphy hopes to populate storefronts with nothing but mom and pop shops. “They know the customers will be able to afford their services,” she said.
That, too, was the lure for the shops that moved into a former retail desert on the Upper West Side. Beginning in 2009, Chetrit Group and Stellar Management filled the ground floor of Columbus Square, a rental complex that stretches between 97th and 100th Street on Columbus Avenue, with a Whole Foods, Crumbs Bakery, Sephora, and other prominent national chains.
“It’s a high-end neighborhood now. Before it was blight,” said Lauren Rosenthal, a broker at Citi Habitats. “It’s basically a really nice mini-mall right in a residential neighborhood.”
Rosenthal has shown a handful of clients units at the development, and if it weren’t for the strip of shops along Columbus Avenue, they might have overlooked the block entirely – and missed out on touring stunning residential amenities at 808 Columbus, like landscaped gardens and a salt-water swimming pool.
“They’re still developing the Amsterdam side,” Rosenthal said. “I was just there yesterday and there was a new grocery store.”
Even in neighborhoods that seem to have it all, apartment hunters can run up against the occasional retail gap. Several years ago, Ariel Schuster, an executive vice president of Robert K. Futterman & Associates, brought a Whole Foods to 101 Warren Street, a 35-story condo tower in the southwest corner of TriBeCa.
Despite the neighborhood’s proliferation of acclaimed restaurants, like Nobu and Bouley, amateur chefs had few convenient places to pick up specialty ingredients. “There was definitely a need down there for a grocery store,” Schuster said.
With two- and three-bedroom units listed from $2.3 million to $7.95 million, according to StreetEasy, 101 Warren has the demographics suitable for a gourmet market. But Schuster said that Whole Foods didn’t put much weight on who was living above it. Retailers in dense, desirable sections of Manhattan, he said, “like having high income levels above, but they’re not really focused on it.”
Schuster filled the remaining retail spaces at 101 Warren with a Barnes and Noble and Bed Bath and Beyond. And at 88 Leonard, a nearby rental tower built by Africa Israel, a brand new outlet, Prime Essentials, will be opening within two months. “It’s like a high-end sort of Bed Bath and Beyond,” said Oldover of Africa and Israel. The company was in talks with a nail salon for the space, which borders Broadway, until a manicure place opened across the street.
For luxury condos in prime shopping districts, filling retail spaces requires a different frame of mind. “We were looking for credit-heightened tenants,” said Andrew Bradfield of Orange Management, a co-developer of 123 Third Avenue, an 18-story glass condominium tower on the southeast corner of Union Square, with only four units, all penthouses, still on the market.
Before construction began, Bradfield and F&T Group, an international firm with an office in China, sought out a bank to fill the lone retail space at the base of the building, which sits on 14th Street opposite a Five Napkin Burger. It was at the height of the boom, and banks seemed like a stable option.
Because Union Square is already packed with chain shops of every variety, as well as a farmer’s market and a handful of popular restaurants, Bradfield didn’t have to concern himself with providing basic necessities, or even a dose of trendiness, to the neighborhood. From the western corner of Union Square to 123 Third Avenue, 14th Street is highly gentrified, Bradfield said.
Capital One Bank signed a lease in 2008, and will soon be opening. “Lining up a tenant was vital to construction,” he said.
At Boulevard Condominium, a development on a stretch of Broadway between 86th and 87th Street lined with fashion outlets, one of the clients of Rosenthal of Citi Habitats purchased a unit after learning that common charges would be relatively low thanks to income generated by retail tenants, including a Gap.
Unlike buyers in a more remote development, her client didn’t pay too much attention to the shops downstairs. “It’s not the stores that attracted them,” she said.