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Neighborhood Fashion
Fashion Center BID's Barbara Randall
The Fashion District has undergone a renaissance over the past decade. But even though it's cleaner and safer, work is far from over, says Fashion Center BID executive director Barbara Randall, who tells us the neighborhood had to balance the needs and concerns of a shrinking fashion production base with entertaining tenants who may have overlooked the district before. The BID is attracting new visitors and maintaining the neighborhood's historical significance through programs and attractions, including the recently unveiled Sidewalk Catwalk art exhibition down Broadway. It comprises 32 mannequins by designers such as Donna Karan, Betsey Johnson, and Tommy Hilfiger, whose mannequin Barbara poses with above. It also partnered with the Port Authority Bus Terminal to use empty retail space for an art gallery and sample sales.
Fashion District Button and Needle
For one, the neighborhood is lacking cultural amenities and destination dining, even though its location between 34th and Times Square and a dedicated pedestrian mall makes it one of the busiest foot-traffic corridors. Barbara says the real estate industry needs to be aware that that the district has fewer than 50% fashion tenants, adding that zoning issues are the biggest caveat. In '87, a zoning overlay was enacted on the side streets, setting aside 50% of space for fashion production, but many manufacturers have moved offshore, leaving empty space. Some building owners are not complying, renting to creative tenants—as much as 4M SF is affected, Barbara points out. The City needs to change the zoning to allow for highest and best use legally, she says, and allowing more residential is necessary for a 24/7 neighborhood.
The Kaufman Org.'s Grant Greenspan
If you want value, The Fashion District may be just what tenants are looking for, say The Kaufman Org.'s Grant Greenspan, above, and Mike Heaner, two of the submarket's top tenant reps. Fewer tenants are moving west and Midtown rents have eased up, increasing the number of firms looking to relocate or stay in the neighborhood, which has average asking rents of $35/SF. Creative tenants, particularly Internet, advertising, and media companies, are making a significant push—LivePerson.com recently inked 18k SF at 475 Tenth Ave., while Metro Creative Graphics signed a 10-year, 15k SF renewal at 519 Eighth Ave. Even financial firms and hedge funds are looking for back-office space at a discount while keeping main offices.
The Kaufman Org.'s Mike Heaner
Fashion tenants, in particular, are feeling guarded optimism toward their industry (above, Mike stands inside the 1.1M SF showroom mecca 1407 Broadway, home to Geneva Watch and Mokuba). They're now taking the time to reposition by taking more space, but with shorter commitments. Small, 1.4k to 2.7k SF pre-built turnkey spaces for three- to five-year commitments are seeing particular demand, they say. Although they expect a slowdown in velocity beginning in 3Q, they foresee rents stabilizing and concessions leveling off. Average vacancy is under 10% in most parts of the neighborhood and 6% on Seventh Avenue. Consumer confidence acts as a leading indicator for retail sales and the price of rents, so what's happening in the Fashion District is a good barometer to the overall economy, they say.
Savitt Partner's Bob Savitt
But with the stabilizing rents and market encouragement also comes long-term leases, which will continue going forward, says Savitt Partners president Bob Savitt, whose firm owns and manages 2M SF in the Fashion District. A flurry of activity the past three months has brought his portfolio to 98% occupancy, including Ogan/Dallal Associates' 1.7k SF and LA Movers' 2.1k SF relocations to 530 Seventh Ave., a building that's now fully leased (with the exception of a 28.7k SF mezzanine/retail space) and has a waiting list. 525 Seventh Ave., 499 Seventh Ave., and 218 W. 40th St. showed similar activity, with the latter also 100% occupied.
499 Seventh Avenue, New York, NY
499 Seventh, which features only one tenant per floor, particularly saw a boost with five leases, renewals, and expansions totaling 32.7k SF. For one, the Milan-based Selerant Corp., whose NY operations were based out of Brooklyn, relocated to the building—and now the 180k SF property only has 9.6k SF of space left. Tenants have been attracted to the area since it's cleaned up considerably, Bob notes, adding that the tenants recognize the importance of proximity to all of Manhattan's major Midtown transportation centers, including Grand Central, Penn Station, Port Authority, and Times Square station.