Retail Rents Are Skyrocketing on 34th, 42nd Streets

Rents for retail space on 34th Street have skyrocketed as the area changes to a destination for national franchises from a discount Mecca, according to real-estate experts.Rents on 34th Street between Fifth and Seventh avenues have climbed 82% in the past year to $299 a square foot, with stores such as American Eagle Outfitters and restaurants such as Heartland Brewery moving in, replacing local discount shops and shoe stores.The data were cited in the fall retail report issued yesterday by the Real Estate Board of New York.“This is no longer a site for discount stores, but a street filled with national brand names that can also be found in neighborhoods like the Upper West Side and SoHo,” the executive vice president of the Lansco Corporation, Robin Abrams, said.The report also found that rents along 42nd Street between Sixth and Eighth avenues increased 54%, to $243 a square foot, compared with the same time last year.While rents spiked along those major retail corridors and others around the city, including Midtown South, which was up 21%, and the East Side, which increased by 24%, the average retail rent for the entire city rose a modest 5%, to $97 a square foot, according to the Real Estate Board’s report.The discrepancy stems in part from the arrival in New York of large national chains, which have moved into the main shopping districts and driven up rents.Those chains, including the clothier H&M, Home Depot, and the jeweler Zales, are well capitalized and will pay higher rents to penetrate the New York market through its main shopping thoroughfares, such as Times Square, Broadway, and SoHo.“Their presence in these areas has pushed up the price of rent, while also increasing the quality of the retailers around them,” the senior vice president of Northwest Atlantic Real Estate Services, Chase Welles, said.Many of those stores also have policies of uniform pricing, so that prices in their stores in Kansas, for example, are the same as in Manhattan, allowing New Yorkers access to less expensive goods, Mr. Welles said.While retail rents have undoubtedly increased in the past year, the sharp hikes illustrated in yesterday’s report, which is a compendium of data from 17 commercial real-estate firms that are Real Estate Board members, may be somewhat misleading, some industry professionals said.“Rents have gone up along the major retail thoroughfares, but I would put that number closer to 20%,” Mr. Welles said.One reason average rent increases in the past year may not have been as sharp as the report suggests is the pattern of vacancies.“The market is very tight this year, with a number of large spaces rented out last year, leaving the more expensive small places on the market for this year,” Mr. Welles said.Similarly, Lansco’s Ms. Abrams said: “The space available this year is at the high end of the spectrum, driving up the average rent and making it appear rents have increased even more dramatically than may be realistic.”In addition to the main retail routes, the study examined the Meatpacking District and 125th Street. The Meatpacking District showed solid retail rents, while the 125th Street corridor saw a near-doubling of vacant retail space in the past year, to 991,775 square feet from 551,874 square feet.“This would normally be a bad sign,” the head of research at the Real Estate Board, Michael Slattery, said, “but it means more people are putting out their listings.”

Retail Rents Are Skyrocketing on 34th, 42nd Streets

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