Shopping Center Business

MAY 2016

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

Issue link:

Contents of this Issue


Page 252 of 358

HIGH STREETS 248 • SHOPPING CENTER BUSINESS • May 2016 L ast year, New York City's upper Fifth Avenue, which stretches from 49th Street up to 60th Street, once again topped Cushman & Wake- field's Main Streets Across the World 2015/2016 report. With average rents rising to $3,500 per square foot, this re- tailing mecca was nearly 50 percent more expensive than second place Causeway Bay in Hong Kong, where rents averaged $2,399 per square foot. Further proof of New York City's retail power is the rents being found elsewhere in the city. In fourth quarter 2015, ground-floor retail space in Times Square was fetching an average of $2,336 per square foot, and Madison Avenue's ground-floor space from East 57th Street to East 72nd Street was averaging $1,601 per square foot, according to Cushman & Wakefield's Manhattan Retail Market Statistics report. To put these prices in perspective, con- sider that in 2015 the high retail streets in both Paris and London — Avenue des Champs Elysees and New Bond Street, respectively — achieved average rents of $1,300 per square foot, according to the Main Streets Across the World report. STRONG FUNDAMENTALS A number of factors are helping to fuel the high rental prices in New York City. In 2015, 58.3 million tourists traveled to New York City, and, this year, 59.7 mil- lion are expected, according to NYC & Company, the official marketing, tourism and partnership organization for the city of New York. Additionally, New York City's econo- my is growing. It expanded by 3.4 per- cent in 2015, compared to 2.1 percent in 2014 and above the national rate of 2.4 percent recorded in both 2015 and 2014, according to the Office of the New York City Comptroller's Q4 2015 Economic Update. The report states that New York City added 97,700 new private-sector jobs in 2015, marking the fifth year in a row that the city's private sector has added more than 90,000 jobs — the strongest pace of job growth on record. And, more people are calling New York City home. The U.S. Census Bureau es- timated the city's population at approx- imately 8.55 million people in July 2015, an increase of 375,300 residents over the April 2010 decennial census count and the most robust pace of growth since the 1920s. With these strong fundamentals under- lying the city's retail growth, there is one big question on everyone's mind: how much higher can rents go? "If I look back at the last 10 years and I see where we are now, we're hitting peak cycle," says Gene Spiegelman, vice chairman and head of retail services for Cushman & Wakefield in North America. "That doesn't mean the bubble will burst. It does, however, raise the question of who will be able to fill the available spaces at these rates." Here's a closer look at the deals and dy- namics driving retail performance in the city's major shopping districts. FIFTH AVENUE As evidenced by its record-breaking rental rates, upper Fifth Avenue continues to hold the title of most expensive retail real estate in the city. "The best of the best retail on Fifth Avenue, between 55th and 57th streets, has achieved retail rents over $5,000 per square foot not once, but on several oc- casions," says Patrick Breslin, executive managing director for Colliers Interna- tional in New York City. "If someone told me 10 years ago that they were going to buy a building and get $5,000 a square foot from retail tenants, I would have thought they were crazy." Despite the prices, retailers from spe- cialty soft goods to tech continue to choose Fifth Avenue for flagship store lo- cations. Coach, for example, recently signed a deal to open a flagship at 685 Fifth Avenue for over $3,500 per square foot, Breslin says. "If retailers can accurately pinpoint what they believe the stores can do in sales, then they can pay the rent," he says. "They are getting a better understanding of the market and are being more bullish on their projections." Spanning 20,000 square feet over three floors, the Coach space will feature unique elements such as a Craftsmanship Bar — highlighting the increasing trend for retailers to use their Fifth Avenue real estate as a unique branding opportunity in addition to a sales driver. "The trend has been and continues to be business operators looking at their brick- and-mortar store ei- ther as a very unique destination, lending an experiential val- ue to the customer, or as a link in their omni-channel chain," says Nina Kampler, founder of Kampler Advisory Group. Reaching Great Heights Have the highest retail rents in the world gotten too high? Lindsey Walker Marcec Welles Spiegelman Bulow Bellantoni

Articles in this issue

Archives of this issue

view archives of Shopping Center Business - MAY 2016