Consolo: retailers going back to basics and SoHo

Real Estate Weekly, May 28, 2003 by Faith Hope Consolo

It can be said that, in many ways, the real estate market resembles the stock market. When the stock market enters a state of turmoil and plummets, the smart investor sees it as an opportunity and therefore buys. This statement also holds true in Manhattan's real estate market; and in no place is this phenomenon more evident than in Soho.

Recently, Dolce & Gabbana signed a lease to expand its West Broadway store by another 3,000 SF. Clothier, The French Connection, also just renewed its 10,000-SF lease at the corner of West Broadway and Prince Street, committing to an additional 15 years at the prime location. My partner, Joseph Aquino, and I are currently representing six Soho properties exclusively in the area.

So, if there is all of this good news in the marketplace, then why aren't retailers out there talking about it? Wouldn't these retailers want to publicize booming sales? The truth of the matter is, quite simply, no. Retailers rarely tout the success story for fear that a competitor will relocate directly next door. However, the renewals and expansions of these companies is a sure sign of vitality. These indicators portray a more realistic picture of the retail landscape: Soho is back on its way to its original splendor.

Anyone who follows the stock market also knows that cycles are inevitable and that, over time, the market will expand and contract.

The same can be said for the real estate market. Just a few years ago, a spill-over of demand in the area caused a push-back effect, whereby tenants moved from Soho to Noho and from Noho to NoLita. This trend has now reversed and retailers are discovering affordable rents on Soho's side streets. These viable options have retailers going back to basics, and back to Soho.

In the business world, we look to economic indicators such as interest rates, unemployment rates and consumer confidence in judging the health of the market In the retail world, one sure sign that we are approaching an upswing is an abundance of new construction. Soho, once known solely for its amazing restaurants, artists and galleries, is a perfect example of an area that has seen new construction followed by a significant increase in activity.

For example, Soho never had a hotel, but then the Soho Grand Hotel, The Mercer Hotel, and later, 60 Thompson entered the neighborhood and it has become a tourist destination ever since.

Major clothing and accessories designers were never a Soho mainstay either, but following Louis Vuitton's arrival on Greene Street, uptown discovered downtown and retailers such as Burbeny, Chanel, and Salvatore Ferragamo followed suit, giving us Soho as we know it today. In fact, while the nature of the retailer's businesses has changed over the years, the demand has only increased. Marquis retailers such as Ernporio Armani, agnes b., Anna Sui and Via Spiga have made Soho the place to be when it comes to attracting shoppers.

While Spring Street has become a popular choice for retailers taking the leap into Soho, Wooster Street in particular is fast transforming into one of the most exciting shopping streets to explore, with new stores and galleries opening almost every single day. Marithe & Francois Girbaud, Pogessi, Bameys Co-op, Steven Alan, Kenzo, The Rug Company, and Val Cucina have all emerged in this hot spot within the last year and Atmosphere Home is slated to open this summer. Art galleries and off-Broadway theaters complete the mix, proving there is truly something for everyone, from shop-a-holic to art enthusiast The area's heavy foot traffic supports this notion and retailers are quickly realizing the benefits of presence on less pricey, yet utterly attractive Wooster.

Much like evaluating a stock portfolio, it is important to also realistically examine the flip side of any "hot buy." For Soho, it's the retail zoning. In other areas of Manhattan, retail is restricted to the avenues and approximately 10 to 15 feet off the corner, ensuring that side streets remain largely residential. In Soho, the City zoned the retail areas to stretch around the entire block. Practically every single square foot is a retail area, creating a plethora of product and a bevy of competition.

During each expansion, Soho's boundaries have pushed north, south, east and west, nearing volume comparable to Midtown Manhattan's, the number one business district in the country in terms of both quantity and sales.

Those proficient in investing and accustomed to following the market's long-term patterns comprehend that risk equals reward. For retailers seeking out a prime Soho retail space, the time to act is now. A leasing market that is already starting to heat up will only get hotter and eventually, unattainable for many retailers.

And yet, in spite of the fireworks, Soho still remains Soho, a special neighborhood with its distinct personality and fascinating quirks, fulfilling what we have always looked to it for: fun times and a relaxed atmosphere. That's something any wise real estate investor should be bullish on.