Northeast Real Estate Business

NOV-DEC 2015

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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Page 55 of 64 Northeast Real Estate Business • November/December 2015 • 55 be opening and a blow dry bar. Urban Outftters, just north of Macy's, had a coffee bar; it wasn't performing well, so they put their own café in. We've got Old Navy renovating its store in time for Black Friday. As always, B&H is kind of in its own world with the seminars three days a week. They have their own Apple store within the store, and obviously the legendary customer service that people associate B&H with. NREB: Pat [Breslin], what are you see- ing in New York? Breslin: The outer boroughs of New York get higher rents than a lot of the super high-end shopping streets around the world. The Bronx and Brooklyn rents are astronomical. To hit on what Rich said, a lot of retailers are saying the same thing. Their busi- ness is good, but inconsistent. Every- one says the economy is rolling and on fre, but none of the retailers on a national average made the numbers. They were all two-tenths below what everyone was projecting for them, so that just says to me that spending is subsiding a little bit and there's a lot of uncertainty. The rents in the city here are just astronomical; 'explosive' is the word I use. I just renewed a deal that I did 10 years ago in Times Square where the tenant paid $185 per square foot, and today they're going to pay $2,100 per square foot. That says that there's a problem. It's a good problem for landlords until their tenants can't pay the rent, and that to me is what the open-ended question is: when are retailers not going to be able to afford these rents? And that is when the bub- ble breaks. Graiser: We're starting to see an is- sue with rents in SoHo and Broad- way, and it is just amazing to see how many vacancies there are. We had a number of clients closing stores and we thought we were pretty below market. We were really struggling to try to get replacement deals done or even a reasonably good deal done with the landlords. There are some landlords that really believe their own script that they should get $1,000 per foot. There is plenty of space that's go- ing to continue to go on the market, and I think you're going to start see- ing it more and more around the city. NREB: Is it getting to a point where the margin is less on what retailers ex- pect to earn on a store here? Kampler: I think 'earn' is a stretch. I think some of these stores are bill- boards, and when you think about some of these very large deals that have been done over the last year — the new Microsoft store, the Polo store, the new Victoria's Secret that was announced last week — the rents are astronomical. If you talk behind the scenes with some of these compa- nies, there's a limit to how many more of those 50,000- or 60,000-square-foot luxury aspirational companies there are. Michael Kors isn't really doing stores; Coach isn't really doing stores; Polo is not doing another Fifth Ave- nue; and then you've got all of the oth- er competing markets in the city with much cheaper rent, so there's defnite- ly less of that activity. The companies that are coming in, whether it's Zara with its continued expansion or H&M with its triumvirate program and its continued expansion, that's much more measured. Graiser: When the lease gets signed, they have all the studies that support why they're going to make money $153,000,000 FLOATING RATE ACQUISITION/ REPOSITIONING LOAN MADISON AVE. 300+ KEY HOTEL NEW YORK, NY|SEPTEMBER 2015 $150,600,000 FLOATING RATE BRIDGE LOAN 330 WEST 42ND STREET MIDTOWN LANDMARK OFFICE BUILDING NEW YORK, NY|AUGUST 2015 $15,250,000 REFINANCE PRIME GEORGETOWN, DC COMMERCIAL CONDO JULY 2015 $100,000,000 20 YEAR FIXED RATE SELF LIQUIDATING LOAN BOUTIQUE NOMAD 200+ KEY HOTEL NEW YORK, NY|SEPTEMBER 2015 140 Broadway, 41st Floor New York, NY 10005 P (212) 668.1444 F (212) 668.1655 it's who you know. Contact us to learn more about how we can provide you with unparalleled service. RECENT TRANSACTIONS Daniel Lerer Director, Investment Sales & Finance, Licensed Real Estate Salesperson P. (212)837.4636 E. Will Watkins Senior Director of Finance, Licensed Real Estate Salesperson P. (212)837.4546 E. From left, Richard Cohan, 34th Street Partnership; Patrick Breslin, Colliers International; Joseph French Jr., IPA Institutional Property Advisors; Victor Menkin, Menkin Realty Services Inc.; Frankie Campione, Create Architecture Planning & Design; Nina Kampler, Kampler Advisory Group LLC; Stephen Stephanou, Crown Retail Services; Lee Spiegelman, Ripco Real Estate; and Deborah Jackson, Cushman & Wakefeld.

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