In Lower Manhattan, Retail Is The Final Piece Of The Puzzle
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The last half-decade has brought sweeping changes to Lower Manhattan, with a flood of new residential and office product completely reshaping the neighborhood.
Huge swaths of office space have been added to the area — some 10M SF of new office inventory since 2009, according to Colliers International — and an influx of new residential buildings and rental properties is bringing more residents than ever to the once 9-to-5-exclusive area.
Lower Manhattan’s retail market, the final piece, is now starting to fall into place — though the neighborhood is still dealing with many of the challenges impacting retail at large.
“Lower Manhattan underwent this enormous burst of leasing activity, when you had all of the leases completed at Brookfield Place, the Oculus and on Broadway … so you had a tremendous amount of absorption over a relatively brief three-to-five year period,” said Cushman & Wakefield Vice Chairman Alan Schmerzler, who brokered the deal for Zara to take 30K at SF 222 Broadway back in 2014 — which was then considered a major step for the downtown retail scene.
“I think Downtown is taking a breather as retailers are reassessing where the opportunities are now," he said.
Globally, much of the retail success lately has fallen into the experiential — read: Instagrammable — department. In New York, food and beverage and fitness offerings have increasingly become landlords’ solution to filling space.
Lower Manhattan seems to be in keeping with that trend. At this week’s Real Estate Board of New York’s Annual Retail Deal of the Year Awards, the top prizes went to leases in the Financial District.
The Most Ingenious Retail Deal of the Year was awarded to brokers who arranged for Life Time Fitness’ 74K SF lease at One Wall Street earlier this year.
The REBNY Retail Deal of the Year Award went to the team that brought dine-in movie theater Alamo Drafthouse Cinema into a 40K SF space at Fosun’s 28 Liberty St.
“[The neighborhood] is really developing into a great new market,” RKF Vice President Peter Whitenack said. He is handling leasing at Macklowe Properties' One Wall Street, a building conversion that will bring 550 new condominium units to the area.
Whitenack, along with colleagues Jackie Totolo and Scott Zinovoy, won the award for the Life Time lease, along with tenant brokers The Dartmouth Co.’s Joe Mastromonaco and Fritz Kemerling.
"Traditionally Wall Street has always been seen as office buildings — it's now 75% residential ... and in the neighborhood a lot of B and C class buildings have been converted," Whitenack said. "The retail market demand is there.”
At 28 Liberty, Alamo plans to open a 12-screen multiplex later this year. The building, where Danny Meyer opened a new restaurant last summer, is also planning a 35K SF food and entertainment venue run by Legends Hospitality that will feature international chefs and performers.
“I think [the retail in the area] is still coming … especially on Broadway there is more and more retail interest and on that stretch, people will see more and more traditional retail,” Mastromonaco said. “Downtown has really grown and the residential has really grown, and that got [Life Time] very comfortable with One Wall Street for their next biggest spot in their city.”
The Alliance for Downtown New York President Jessica Lappin said the local community needs more entertainment and fitness options — and deals like Alamo and Life Time speak to those trends. She also pointed to leases like the Shakespeare & Co. bookstore and café at Brookfield Place and bookstore McNally Jackson’s expansion plans at South Street Seaport as examples of the direction the area is taking.
“Retail is always in a constant state of flux … [but] what we are seeing is the continual additional of retail and food, especially further east, on Water Street,” she said.
Those retailers will soon have hundreds more potential customers after HR tech company Justworks announced it was moving its headquarters to 270K SF at 55 Water St.
Overall, the availability rate on Wall Street, Broadway and Fulton streets increased to hit 16% in the first quarter of 2019, according to Cushman & Wakefield. The average price per square foot was $337 — a decrease of $27 as landlords moved to set more affordable rents, according to C&W.
CBRE’s Richard Hodos said retailers and landlords in the neighborhood are now in the “fine-tuning” stage, figuring out what works and what does not.
“On Broadway and Wall Street area there are still vacancies … I know several stores want out,” he said. “That is not necessarily the fault of the district. The stronger stores are surviving and the weaker are failing.”
It has now been three years since Westfield World Trade Center opened and four years since Brookfield Place opened. The two shopping behemoths are interconnected, and have multiple access to the PATH station and several subway lines.
Both developments have experienced major growing pains. Saks Fifth Avenue closed at Brookfield Place, and Convene is taking its place — though sources say the mall is still performing well.
Westfield's WTC retail complex has been plagued with problems, though Hodos said some retailers in the building are in a good spot. He believes, overall, retail has lagged in the area — but it is improving.
“It takes three years for most shopping centers to mature … and it takes three years for a lot of retailers to reach their stride. We are just hitting that now,” he said. “The neighborhood is maturing. It’s not that five-day-a-week, 9-to-5 [place] … it’s become a legitimate shopping area."