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 57 of 64 Northeast Real Estate Business • November/December 2015 • 57 is in Manhattan, and developers paid very dearly for those sites. They've penciled in these high rents, so it is going to be a real problem to fll that space, but they have to achieve very high numbers to make the projects pencil. Menkin: And let's remember a lot of those development sites are projected based upon FAR zoning constraints, and they're looking to maximize retail in a market where there's hyper sup- ply. You're really rolling the dice rela- tive to what the market is going to be like two years down the road. If you overpay now, what are rents going to be when you come to market? Jackson: I'm feeling a little bit more excited than last year. We have more markets where tenants are not go- ing to be able to afford to renew, and that's going to be an issue, but I think if you're creative, there are a lot of op- portunities. It may not be on the main streets of some of these neighbor- hoods; it may not be in the buildings that were transacted at high prices; but I think that there are opportunities to be had. With the residential and of- fce development that we've got com- ing onto the market with the employ- ment growth, particularly in the tech area, I'm feeling that you just have to be a little bit smarter, but I think that's the nature of our business. If you fol- low, and you're last in line, you're not going to be doing very well, but if you look around and see where the new opportunities are, you're going to make some money for your clients and for yourself. Stephanou: Madison Avenue is really an interesting submarket because you saw a lot of it hit very hard during the time of the fnancial downturn, and even before that. Then, it took off very quickly and you had rents that were going back up. Now, there are a lot of spaces available on Madison again be- cause retailers went in again and said, 'things are looking a little better, let's try to make it,' but they struggled. We have one retailer that has done that, and they moved up, but they jumped up to about 72nd Street. The retailer is now thinking about moving up to 79th and they don't want to go over to Third Avenue because that's not our brand. The asking rents in the 80s are at about $600 per square foot. That doesn't mean that's where a deal will be done, but that prices them basical- ly out of the market. Then the other question arises. Retailers say, 'We re- ally want to be on Madison Avenue but don't want to pay Madison Ave- nue rent, can't you fnd us a cute little townhouse right around the corner?' We just did a deal where we found something on East 78th and we were on it 100 percent; we did not get out- bid on it. Those type of opportunities — yes, there's a few of them — they're still not on Madison and we still have a little bit of concern about whether they're just a little bit off or complete- ly, but that's the challenge that retail- ers are facing. Madison Avenue is a bit scary right now. Jackson: But what about The Whit- ney? It beneftted their relocation… Breslin: You don't have the foot traf- fc up there that you have in the other places. That part of Madison Avenue is quiet. The only way you make money in the city is by volume, that's the bottom line. If you don't have the volume, you're not going to make the money. Cohan: And the retailer has to under- stand the market. Starbucks Coffee now has three stores in the Empire State Building. They got their frst store on 34th Street and just in the last couple of weeks they opened an express store on the 33rd Street side at a different rent than what someone would pay on 34th Street. Just this week now the two in the Empire State Building — for $2 — will deliver the coffee to your offce; so they effective- ly have three concepts in the Empire State Building. King: I feel very much like the odd man out here because in my world in the outer boroughs it's not a case of hyper supply as much as it is hy- per demand and a lack of supply. We don't have the blocks of space. There's probably more [retail] space on Madi- son Avenue in 10 streets than there is in entire neighborhoods in Brook- lyn and Queens. Clearly Brooklyn and the outer boroughs have become much more in favor with all manners of retailers and developers, so you see pioneers are clearly able to do reasonable transactions and retailers can fourish and survive. Then there are people who I really wonder what they're drinking or smoking when I see their projections. Clearly there's a limit to what any retailer can pay, but I don't think any of these folks can understand that at some point in time interest rates, even if they go up by an eighth of a point, they will go into some black hole that I don't know that they're ever going to come out of. Breslin: He has a good point. Brook- lyn is a different animal than any oth- er suburb or outer borough in New York City because they have the foot traffc — 3 million people live in the borough. Daniel Webster Plaza Nashua, NH 2,500 SF available Stow Shopping Center Stow, MA 2,000 - 3,696 SF available 1000 Bald Hill Road Warwick, RI 2,800 SF available Burlington Marketplace Burlington, MA 1,630 SF available Flint Village Plaza Fall River, MA 2,002 - 4,102 SF available Smithfield Commons Smithfield, RI 1,330 - 2,660 SF available Leasing Availabilities Meet with us at ICSC NY National Conference Dec. 7-8 FEATURED Joel Kadis: Partner - Leasing & Development | 781-202-3544 | Evan Eisenhardt: Vice President - Leasing | 781-202-3536 | 296 Newbury Street Boston, MA 1,341 (ground level) SF available Daniel Webster Shops Nashua, NH 1,467 SF available Once again, New York's Upper Fifth Avenue is the most expensive retail street in the world, according to Cushman & Wakefeld's Main Streets Across the World report, which tracks more than 500 of the top retail streets around the globe. By the second quarter of 2015, rents on New York's Fifth Avenue reached US$3,500 per square foot per year, an increase of 3.6 percent year over year and 46 percent above the second-placed Causeway Bay in Hong Kong (US$2,399 per square foot per year). prices psf/year Source: Cushman & Wakefeld's Main Streets Across the World, 2015-2016

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