Retail Moves Off the Beaten Path

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With Fifth and Madison avenues long established as premier corridors, New York City has never had much concern about attracting shoppers—or retailers. Yet there's plenty of room to grow, and much of it is happening not on the well-worn paths but as a result of boldly going where no retailer has gone before. “There's growth in the Main-and-Main corridors—Fifth Avenue, the streets of SoHo and now the Meatpacking District—but the residential corridors are changing dramatically,” observes Faith Hope Consolo, chairman of retail leasing and sales at Douglas Elliman.

There's “more work to do,” in Manhattan as well as in the still-underserved outer boroughs, Consolo says. “We're the tourist capital of the world. We're going to have more than 55 million visitors by the end of the year, so we continue to attract everything. In Times Square, the numbers are off the charts, more than Fifth Avenue in some instances.”

On the Upper West Side, the Douglas Elliman leasing team lately has seen “so much leasing activity that Columbus Avenue now has zero vacancy, as does Broadway in the 60s, 70s, 80s and pushing into the 90s,” Consolo said. Some 40 blocks south on the same side of Manhattan, Related Cos.' massive Hudson Yards mixed-use development represents what Consolo calls “the next frontier.” Having already signed handbag maker Coach Inc. as an anchor tenant in the project's South Tower with a 740,000-square-foot office condominium, Related and Oxford Properties Group also secured commitments in April from L'Oréal USA and software company SAP for a total of 517,000 square feet of office. The groundswell of office leasing, Consolo says, “will create the retail demand.”

Thanks to residential development on the Upper East Side, “we have a lot of new demand for shops and services,” says Consolo. “Third Avenue is finally filling a lot of vacancies north of Bloomingdale's. First and Second avenues continue to struggle a little until the Second Avenue subway is finished, but that will come back.”

Due in large measure to the Eataly restaurant/food marketplace concept that came to L&L Holding's repositioned 200 Fifth Ave. in 2010, the Flatiron District is “changing again—there's a lot of new retailers,” Consolo says. At present, the influx is driven more by food than fashion, but “the fashion will follow” soon enough.

The long-delayed redevelopment of Harlem is under way, thanks to a 2010 rezoning of 125th Street, the neighborhood's main artery. As a result, the corridor has “five major new developments on it, and that will tie East and West Harlem together: Spanish Harlem to Sugar Hill,” says Consolo. At one of those projects, the neighborhood will see its first Whole Foods Market; the natural foods giant signed a lease this past October for 39,000 square feet.

At the other end of Manhattan, Downtown has become “an exciting area, like I haven't seen since I've been in the business,” Joshua Strauss, executive vice president with RKF, tells Forum. Lower Manhattan was underserved before 9/11, “and it's still very underserved.”

The neighborhood's residential component “continues to get bigger and hotter, and there are more people moving down there than ever before,” says Strauss. “Tourism has grown tenfold because of the Sept. 11 Museum and the memorial, and there are projects taking shape because of that.” Both the rebuilt World Trade Center and Brookfield Office Properties' redevelopment of its Brookfield Place complex (formerly the World Financial Center) will include sizable retail components.

Then there's Pier 17 at the South Street Seaport, heavily damaged by Superstorm Sandy last fall and now in line for a rebirth. The tourist attraction's owner, the Howard Hughes Corp., in April announced plans to redevelop the Pier 17 pavilion, expanding it to more than 365,000 square feet of retail. “Our vision for a revitalized and reenergized Seaport will create an unrivaled New York experience that is compelling for the ever-growing population of residents, local workers and visitors,” David R. Weinreb, Howard Hughes' CEO, said in a release when RKF was hired to lease up the project. “Working with RKF will ensure we bring best-in-class offerings, including acclaimed national and international retailers, local shops and destination restaurants.”

Along with the new builds, Lower Manhattan's established retail corridors, including Broadway and Wall Street, are seeing “a lot of activity,” says Strauss. “Urban Outfitters has signed a big lease on Broadway and John Street. So with more traditional retail, it's on their radar screen and it's a priority for many of them to enter the market.”

There's another downtown area on retailers' radar, across the East River from Lower Manhattan. Also long underserved, it too is on an accelerated growth curve. “Downtown Brooklyn has always had a lot of traffic, seven days, and it was growing for the past 10 years but now it's really starting to grow,” Strauss says.

Consolo recalls that when Douglas Elliman brought Barney's Co-Op to Downtown Brooklyn, “they thought we were insane going into the hinterlands, but everyone has followed. Now you have H&M going Downtown, you have a retailer like Svarovski, which is perceived as luxury but very well priced, to Downtown. So you have areas like Fulton Street completely refacing, looking more like the new 34th Street, and you'll see more of those retailers” such as Aldo Shoes coming into the area.

Brooklyn neighborhoods that have become go-to residential destinations, including Park Slope and Williamsburg as well as “up-and-coming areas like Bushwick or Gowanus,” have less in the way of national chains, “but you're seeing a lot of cool restaurants and markets and ancillary uses,” Strauss says. “It doesn't take a crystal ball to realize that it's going to become a lot more coveted for retailers.”

Following Brooklyn in the ranking of what she calls “the burgeoning boroughs,” Consolo ranks Queens as the next growth area. “Queens does need more retail,” she says. “You only have Queens Boulevard, Steinway and Continental Avenue, and now you have the fill-in of Vernon Boulevard. And nobody ever talks about the Bronx, but there are seven new projects that will bring big retail demand. And even Staten Island: last on the boat, but we'll see what happens.”

Along with new neighborhoods, there are new concepts. The quick-serve restaurant format in particular has generated many new store openings across Manhattan; Strauss cites Coffee Bean & Tea Leaf, Le Pain Quotidien and Pret a Manger as examples. Further, the success of the Apple Store has other big names in consumer electronics, including Microsoft and Samsung, “kicking tires and markets and thinking about a retail program.”

With clothing from Uniqlo, the Japanese casual apparel manufacturer and seller, a familiar sight around town on both subway ads and riders, the parade of overseas retailers into Manhattan continues. “You have a lot of niche brands, which haven't opened the big superstore or the flagship, but are filling in,” Consolo says. “We're seeing activity now from Australia. You're going to see menswear and accessories; I can't announce it yet, but each one of those categories has very large stores planned.”

Canada, too, is sending retail chains into the US. Aside from Joe Fresh—a fashion brand that ironically was created for sale in Canadian supermarkets—other apparel categories are represented, including activewear. “We have a new competitor of Lululemon coming into the city, just inking a store in Flatiron,” Consolo said. “You will see others from Asia, and a couple more from Spain, too, because of what's going on in Europe. They have nowhere to grow but in the US.”