Retail on E-Street as condo boom pulls in business

Real Estate Weekly, March 22, 2006 by Tiffany Razzano

The last 17,000 s/f of space in Tishman Properties' 200,000 s/f E Walk on 42nd Street has just been gobbled up by restaurant chain, Dallas BBQ.

David Rosenfeld, assistant director communications for Tishman, confirmed the eatery would take the $75 million entertainment and retail complex that stands at the gateway of arevitalized 42nd Street to 100% occupancy. Robert Carbonara of Ripcorepped Dallas BBQ in the deal.

Seen as a symbol of the effort that transformed Times Square, E Walk--which is anchored by a 90,000 s/f Loews Theater with a Chevy's restaurant holding up the Eighth Avenue corner--seems now to be positioned to provide an entre to a new and improved Midtown West where retail rents are being pumped up thanks largely to a boom in both condo and office construction.

"Eighth Avenue is a terrific anchor street to the west," said Ben Fox, executive vice president and principal of Newmark Knight Frank. "And that whole area from the Port Authority north to 57th Street is filling in very nicely. That coupled with the increase of pedestrian traffic and the increased quality of the traffic combine to really make Eighth Avenue a very, very viable street for retailing."

According to Robin Abrams, executive vice president of the retail services group for Lansco Corporation, "It used to be Broadway and Seventh Avenue were the main quarters where we were seeing activity. It's now moving west towards Eighth Avenue and even spilling over towards Ninth on side streets."

One of the biggest influences on the changes in the area is the construction of the new, 1.6 million s/f New York Times building located at 620 Eight Avenue, across the street from the Port Authority Bus Station.

There have also been a significant amount of high-end residential buildings popping up in the area, the most significant being Extell's under construction 58-story condo tower, the Orion, at Ninth Avenue and 42nd Street, which is already nearly 100% sold. Related is also reported to be erecting a mixed-use tower on Tenth Avenue, JD Carlisle is building a 46-story condo tower at 625 W42nd and The Moinian Group is building The Atelier at 627 W42nd.

The building boom will bring a new type of shopper to the neighborhood looking for a different kind of shopping experience from the tourists and theater-goers in Times Square who have flocked to places like E-Walk.

Said Tishman's Rosenfeld, "We have seen a steady mix of entertainment, retail and restaurant clients since E Walk's opening in 1999. Some of the names have changed, but the products and services provided have remained the same."

According to Corey Zelnick, president of Winick Realty, these new home owners will be looking for big box retailers to cater to home furnishing needs--and already developers are looking to plug the gap.

The new New York Times building will create 24,000 s/f of ground floor retail space with high ceilings, large large floor plates and multi-levels which, according to Zelnick, should "create wonderful, big box opportunities."

Tishman Speyer, who bought the current New York Times building, located at 42nd Street and Broadway, in November 2004, plans to convert the old loading docks into more than 100,000 s/f, of retail space on three levels, a space Zelnick says also lends itself to big box opportunities.

The Port Authority Bus Terminal also has plans to double its retail space to over 200,000 s/f and revamp the facility with hopes of attracting higher quality tenants. So far, both Target and Whole Foods have reportedly approached the PA about renting space.

Meanwhile, Milstein Properties, which owns the empty site across the street from the Port Authority, has plans for developing a mixed-use building there with both retail, office and hotel components.

The expansion of the Javits Center, talk of expanding the Seven subway line and the City Council's commitment to developing the Hudson Yards will act all as a magnet to retailers, according to the city's brokers.

"I think the retail further west on Ninth Avenue and Tenth Avenue will be more focused on serving residential than the retail of Broadway and Seventh avenue, which is serving the tourist base," Abrams said. "I think the flagship type retail geared towards tourist is not going further west, but service oriented will move west as the residential base grows."

Fox, however, sees Ninth Avenue as a nightlife mecca that likely will continue to grow. "The whole metamorphosis of Ninth Avenue, from 42nd to 57th, has been unbelievable," he said. "The restaurants and the nightlife will cause an increase in traffic, bringing additional street life to the far west side which is now having a spillover effect on Tenth and Eleventh Avenues. The whole midtown west, if you will, is becoming a very strong neighborhood. It seems at this point it will continue to thrive."

With retail tenants dying to take advantage of the burgeoning area, rents are starting to see a significant increase. Fox said that there's a shortage of prime space, and as this space continues to tighten, the rents will increase even more. At this point, he said, retail space is going for $500 per s/f and up.