Shopping Center Business

MAY 2016

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

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HIGH STREETS 256 • SHOPPING CENTER BUSINESS • May 2016 the "bowtie" area between Broadway and Seventh Avenue and West 42nd Street and West 47th Street, landlords were asking for an average of $2,300 per square foot at the end of last year. Though this marks a decrease from Q4 2014, which saw ask- ing rents averaging $2,507, the rates have been steadily growing for the past several years — with some landlords asking for up- wards of $4,000 per square foot for prime ground-floor space. The rising rents in Times Square can be attributed to the heavy tourist footfall, as well as landlords adjusting prices to ac- count for the high cost of the bowtie's trademark billboards. The submarket is seeing major investments as well. New York City-based Kushner Companies' ac- quisition of 250,000 square feet of retail space at 229 West 43rd Street for $296 million last year is a prime illustration. There is concern, however, that the big deals being made hide the reality of the submarket. "There is downward pressure on valuation in Times Square," Kampler says. "The owners of the buildings are still asking for stratospheric rents, but there is tremendous pushback from retailers who have rights to renew their leases. Land- lords think they can get $4,000 per square foot because half is for the billboard, and tenants are saying no." Eight blocks due south, West 34th Street and Herald Square benefit from tourist activity too, thanks to the iconic Macy's flagship store, but it's the local shopper that drives this submarket. "This area is a shopping mecca for lo- cals," Breslin says. "It's the commuters from New Jersey and Long Island who travel into nearby Penn Station and walk the corridor on a daily basis on their way to and from work. The foot traffic there is unbelievable." It's that consistent foot traffic that allows landlords to ask rental rates ap- proaching and sometimes over $1,000 per square foot. The average ground- floor asking rent in Q4 2015 was $818 per square foot, according to Cushman & Wakefield's Manhattan Retail Mar- ket Statistics report. Last spring, H&M — which already op- erated nearby stores on 34th Street and Seventh Avenue — opened a new Herald Square flagship on the corner of Broad- way and 34th Street. The four-story lo- cation spans 63,000 square feet, making it the retail giant's largest location in the world. "34th Street is great," Stephanou says. "The amount of traffic that includes both tourists and commuters is amazing. Lo- cals avoid Fifth Avenue because there's so much tourist traffic. But 34th Street is different. Anchored by Macy's and with the addition of H&M's Herald Square flagship, the corridor is very strong." FLATIRON/UNION SQUARE The Flatiron/Union Square neighbor- hood — which follows Fifth Avenue and Broadway from the southern border of Madison Square Park at East 23rd Street to the southern border of Union Square Park at East 14th Street — has seen rising rents like the rest of the city, but activity re- mains vibrant. Average ground-floor ask- ing rents were $446 per square foot at the end of last year, according to Cushman & Wakefield's Manhattan Retail Market Statistics report.

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