Downtown on cusp of a retail revival

Real Estate Weekly, May 28, 2003 by Charlie Aug

Contrary to recent reports about the retail markets staying soft, there has been a flurry of activity in several areas of New York City. For savvy merchants, this steady revival means there are again opportunities to lease space at more realistic rates for their businesses.

Neighborhood retail areas remain as strong as ever, with local and regional retailers replacing national companies. At this juncture, we are also on the cusp of a retail revival in downtown Manhattan, especially in SoHo and on Wall Street. Within the past month, Garrick-Aug's vice chairman Faith Consolo and her partner, managing director Joseph Aquino, have been awarded seven important exclusive agencies in the area, comprising prime space on Spring Street, Greene Street, West Broadway and Wooster Street.

In the Wall Street area, senior managing director Robert Kunikoff is successfully closing deals -- another reality that contradicts reports in the media. Activity has picked up dramatically since February with the return of several large firms to the area. Currently, Kunikoff is in the process of completing significant deals on Worth Street, Broadway and Fulton, Pine Street and Broad Street. Most importantly, his efforts are helping to reposition the retail market in the Financial District. Over the next few years, I predict we are going to see a transformation of this commercial area that caters to hundreds of thousands of businesspeople. The mom-and-pop shops will be replaced by higher-end retailers, which for the most part will be local and regional companies.

In the aftermath of 9/11, many of the small service stores, such as sandwich shops, candy stores and sundries stores closed because they were unable to survive the prolonged economic slowdown in the area Moreover, they are being replaced by retail businesses that reflect a more upscale client base, which is more consistent with the area's demographics.

There is also a substantial residential base on the West Side of Lower Manhattan and continuing growth within that sector, such as the new development at 20 River Terrace in Battery Park City. It is no surprise that experienced retailers are beginning to seize upon these obvious opportunities as a way to expand their markets.

Although the new building at The World Trade Center site may take years to complete -- or even begin -- there is an important commercial and residential base in this area that translates into income for the right retailers. In addition, retail rent rates have softened and there is an urgent need for a variety of services downtown, from hardware stores to finer restaurants.

Businesses are slowly returning the Financial District thanks to tax incentives and other benefits provided by the government. In turn, that brings more people back to the area and stores follow the people. Another important incentive for store owners is the new transportation project that is being planned at Broadway and Fulton. Not only will it bring all the major subway lines into one location, making the Financial District more accessible than ever before, it will renew direct New Jersey PATH train service and bring that business back to the area. Touted as "Grand Central Downtown," this project will have a huge impact on the area. For retailers, this may be the last window of opportunity before the construction really gets underway and rent rates increase.

Accessibility to transportation has also contributed to the revival of SoHo. With a well-developed infrastructure and an easily reached public transportation people are returning to SoHo for its trendy restaurants and diverse stores. Fortunately, many landlords are coming to the fore with a desire to see the area flourish again with more realistic rents.

For more than two decades, SoHo has been a destination point for New Yorkers, tourists and suburban shoppers. Then an act of terrorism coupled with an erratic economy and a diminution of services severely hurt the area But as with everything else in the city, it has been a temporary halt in a neighborhood's economy. And despite the increase in vacancies, there are still hundreds of stores in SoHo that keep it attractive and robust

The same principle applies to the Financial District because it remains a destination point for hundreds of thousands of people every day, who are. down there doing business. Despite a devastating economic slowdown, stability is returning. New York and New Yorkers are resilient; it was only a matter of time before the area became vibrant again and retailers always follow the people.

Other areas Downtown are holding their own, too. Tribeca remains a developing market, albeit, one with trendsetting restaurants, considerable retail and an annual film festival that is branding this neighborhood worldwide. Other emerging markets downtown include the Meat Packing district, NoLita and the new Lower Eastside. I have no doubt that in time they will become established areas for a diverse range of retailers.

Maybe they will one day enjoy the kind of success found in Greenwich Village, which continues to have high retail occupancy rates in virtually all economies.