NYC ‘The Place to Be’ for Retailers

NEW YORK CITY-Retail leasing here took its lumps during the trough of the downturn, but has rebounded to an extent not commonly seen elsewhere in the US, panelists told a NAIOP New York City audience Tuesday morning. “The message we’re getting from retailers is that New York is the place to be,” said moderator Robert K. Futterman, chairman and CEO of brokerage Robert K. Futterman & Associates. He added that “fashion retailers have led the charge,” especially when it comes to making inroads into less-familiar neighborhoods.

As a case in point, Futterman said New York City, and Manhattan in particular, was “probably the only market where retailers will pay for a showcase with a billboard attached. It doesn’t work as well in Las Vegas or Los Angeles.”

Futterman led a discussion—well attended in spite of a dismal weather forecast—in which panelists weighed in on the retail market here from a variety of perspectives. L. Jay Cross, president of Related Oxford Hudson Yards, noted that the retail component of the Far West Side mega-project stood out largely on the basis of its sheer scale. Hudson Yards’ retail alone will be twice the size of the 2.8-million-square-foot Time Warner Center complex, he said.

“The scale sometimes is very daunting, but in the end I think it will be game-changing,” said Cross. It is also likely to draw upon a built-in customer base: in addition to shoppers gravitating from Hudson Yards’ office towers, Cross said the Far West Side is Manhattan’s fastest-growing residential neighborhood but, aside from the Meatpacking District, it is underserved by retail.

Fifth Avenue is hardly understored, yet remains a key location for retailers of all stripes, said Brittany Bragg, COO of Crown Acquisitions, which owns the retail condominium of 666 Fifth Ave. in a partnership with the Carlyle Group. “People come to Fifth Avenue to actually shop,” said Bragg.

She cited the strong traffic generated by the Apple Store at 767 Fifth Ave., even during the midnight-to-8.a.m. timeframe, and Japanese retailer Uniqlo’s 15-year deal last spring for 89,340 square feet at 666 Fifth, reportedly a record setter for retail rents at more than $300 million. “That lease was driven by their belief that they’re going to do the sales,” said Bragg.

If leasing and foot traffic have come back strong, and rents have begun to tick back up as well, then the return of lending is still a ways off. Cross noted that Related Cos.’ partnership with Canada-based Oxford Properties Group, the real estate investment and development arm of the OMERS Worldwide group, gives Hudson Yards a certain amount of pull with lenders that might not be achievable by pure developers. As to whether that will translate into construction financing, Cross said, “We don’t know yet.”

Richard Wagman, managing partner of Madison Capital, noted that compared to a year ago, lenders have been coming back “very quickly,” at least in the sweet spot of loans ranging from $25 million to $100 million. Bragg added, though, that underwriting remains very conservative. “We think that’s a great thing,” she added.