Williamsburg And The Upper West Side: A Tale Of 2 Shopping Districts

New York City’s retail leasing scene is bustling again, but some tenants are eschewing what used to be some of Manhattan’s most reliable retail corridors to expand across the East River.

Retail availability in the city's prime submarkets hit 14.2% in the second quarter, its lowest point since at least 2017, according to JLL. But not all pockets of the city are thriving.

The firm that owns the Empire State Building, as well as several towers around Penn Station, is perhaps the best example of the shopping shift. 

Empire State Realty Trust purchased two mixed-use buildings in September 2023 at 157 and 161 Wythe St. for $26.4M, which kicked off a buying spree that has approached a quarter-billion dollars the REIT has spent in the neighborhood along the North Sixth Street corridor.

ESRT Senior Vice President of Leasing Fred Posniak said last month at Bisnow’s New York Retail Conference that he didn't foresee the Manhattan stalwart branching into Brooklyn.

“If you had said to me, Fred, that you would be in Williamsburg five years ago, I would have thought you had five heads,” he said onstage at Convene 101 Park Ave.

The first property ESRT bought in the neighborhood, at the corner of North Sixth and Wythe, was leased to Glossier, Sugarfish and Glowbar, and Posniak said his team purchased it sight unseen.

Then he checked into The Hoxton hotel and lived in the neighborhood for two weeks.

“I get up Monday morning, I'm standing on the corner at 9 o'clock, and there’s not a soul in the street,” Posniak said. “There's nobody there. I'm saying to myself, ‘Jesus, what did I get myself into?’”

He wasn't deterred for long. ESRT has spent at least $240M buying up nearly a dozen buildings in Williamsburg, according to a Bisnow analysis. In its most recent acquisition in the Brooklyn neighborhood, which closed in mid-July, the REIT spent $31M on a three-story building at 169 Wythe Ave. and an adjacent two-story property at 88-90 N. Sixth St.

Williamsburg has increasingly become a place that retail landlords want to own and where high-end brands want to be. The area has seen a flurry of luxury leasing activity in recent years, with names like Chanel and Hermès taking space. 

Posniak said the reason ESRT decided Williamsburg would be its “next growth market” was the result of a study the REIT did of tenants in two of Manhattan's hottest submarkets, SoHo and Meatpacking. Many also had stores in Williamsburg — and, just as crucially, many didn't yet.

“It's been a learning curve, it really has, and it's something that we feel has a long runway,” Posniak said.

At the end of June, the 10 Williamsburg blocks included in JLL’s retail report, at a 13.3% availability rate, sat below the average of the eight prime Manhattan submarkets. Madison Avenue is the tightest market, at 9.6%, followed by SoHo, at 10.6%.

None of the prime corridors are on the Upper West Side, a point Marc Jacobs Head of North American Real Estate Molly Sandza brought up when moderator Alvin Schein of Adler & Stachenfeld LLP asked the panel, “Why is there so much unleased space on the Upper West Side?”

“For a brand like Marc Jacobs, we're looking for markets that get an intersection of local tourists and office, as many drivers as possible,” Sandza said. “I love the Upper West Side. But if you compare it, for example, to the Upper East Side, there isn't really a dry goods high street to compete with Madison Avenue or SoHo when you're looking at how many stores do I really need in the greater New York City area.”

Tri State Commercial Realty Vice President of Leasing Chandler Slate said the UWS is a local market where locally owned businesses succeed. 

“[Williamsburg] has become a massive tourism destination,” he said. “It's really where the international traveler is going to check off their box when they're going to visit the borough, so I think that leads to that oversupply on the Upper West Side.”

Williamsburg’s asking rents, at $309 per SF, were still below some other prime corridors in Q2, according to JLL. Upper Fifth Avenue is still most expensive, at $2,360 per SF, followed by $1,555 per SF in Times Square, but the Brooklyn neighborhood isn't far below SoHo, at $351 per SF. 

While international travel is down this year, domestic tourism is still driving leasing in some of Manhattan’s busiest retail corridors like Fifth Avenue, Vornado Executive Vice President of Retail Leasing Ed Hogan said.

“It's not as heavily international, but the numbers are there,” he said. “It feels really good. It feels exciting. The stores are busy. People are in the stores with shopping bags.”

But some neighborhoods that looked like problem spots in the immediate aftermath of the pandemic have remained troubled, he said.

In addition to Broadway on the Upper West Side, East 14th Street and Hell's Kitchen are areas that have been trickier to lease, Lee & Associates Managing Principal Peter Braus said. That has to do with perceptions of public safety, Retail by Mona CEO and founder Brandon Singer said. 

“There's a pretty bad homeless situation that's affecting Manhattan in particular, in close proximity to public transportation, which is typically what retailers like,” Singer said. “So some of the areas that public transportation is strong and footfall is strong have come back pretty strongly, but some have not.”

He identified Herald Square as a laggard. It has the highest availability rate, at 35%, of any prime submarket in the city, according to JLL.

Vornado owns several properties in the area with its Penn District redevelopment project, where it has taken steps to improve the perception of safety.

It has eliminated poor sight lines, improved lighting, hired private security and picked retailers that are known for generating lines and activity, like Los Tacos, Hogan said.

“People aren't going to take their wallet out and shop if they don't feel safe,” he said.