Retail Development Charges Ahead Around the City

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The New York Sun

As anyone who has visited the city’s major shopping districts recently can testify, New York is the shopping capital of the world. With a strong local economy and throngs of tourists, the city’s stores are jampacked. Yet real estate analysts for years have said the city is under-retailed. To meet the need for new retail sites, developers are scouting locations, coordinating efforts with planning agencies to meet consumer demand, and erecting giant shopping centers in all five boroughs.

“The New York area is under-retailed and the market is very strong,” the CEO and founder of Blumenfeld Development Group, Edward Blumenfeld, said. “Demand for good sites is as strong as ever and it doesn’t seem to be abating. The outer boroughs have the potential to be the hot spot for the near term; they have the largest inventory of potential sites.”

Retail development operates at a different pace than office and residential construction, and the development of a successful retail site may take as much as 20 years. “The barriers to entry for building new retail in New York City is extremely high,” the president of Triangle Equities, Lester Petracca, said, noting the challenges and risks of acquiring land-use approvals from the city. Many neighborhoods worry about the increased auto traffic associated with shopping sites.

“The increase in retail development in New York City is largely a result of the incredibly strong residential market,” the chief operating officer of Citi Habitats, Gary Malin, said. “Obviously, retailers are looking to establish a presence in the best possible locations; we see this happening in every neighborhood where there has been residential development.”

In Manhattan, construction is under way by a joint venture of Blumenfeld Development and Forest City Ratner at East River Plaza, the first big box center in Manhattan. The 485,000-square-foot center will house a Home Depot, Manhattan’s only Target, and a Best Buy. The development will have an attached 1,250-space parking facility spanning three city blocks. The project sits on the site of the former Washburn Wire factory and consists of approximately six acres adjacent to FDR Drive between 116th and 119th streets. The project is located in the State Empowerment Zone as well as the city’s Economic Development Zone. Retail users may be eligible for incentives and other benefits that the project may offer.

“Large-scale retail development typifies a national trend where retail tenants and developers are venturing to parts of the urban areas long underserved,” the president of ING Real Estate Finance, David Mazujian, said. “East Harlem continues to evolve. It is well located and easily accessible from the FDR. Demographics support continued development and justify big box retailers moving to the area.”

The city’s lower crime rate is another factor spurring retail development. “When the going gets tough, the tough go shopping, but when tough neighborhoods get better, the shopping comes to them,” a former City Council member, Kenneth Fisher, a land use partner at Wolf Block, said. “The safer a neighborhood, the more people on the street. The more people on the street, the safer the neighborhood.”

“Retail provides growth and development in New York City”, the chairman of Jackson Group, Ike Chehebar, said. “It aids in the creation of cash flow from sales and serves as an advertisement vehicle unparalled in any other urban city. Everyone wants to own a retail store in the Big Apple.”

“Retailers want to be in every borough, it’s just a matter of finding the land,” a vice president at Triangle Equities, Brett Goldman, said. “It’s all a matter of time and pressure in the boroughs in that if you can wait, there will be opportunities, but you must keep the pressure on to secure the correct site.”

The Bronx is a borough that has long been under-retailed, sending shoppers into Manhattan or to local discount stores. Construction is now under way at the $500 million Gateway Center at the Bronx Terminal Market, a 1 million-squarefoot shopping mall in the South Bronx, located on 18 acres in the shadow of Yankee Stadium, with on-site parking for 2,800 cars. The center, a development of the Related Companies, is expected to be completed in the of fall 2009. It will house a mix of national and local retailers and restaurants. The anchor tenants will include Target, Home Depot, Best Buy, and Bed Bath & Beyond.

The Related Companies is also developing the Hub Retail and Office Center in the South Bronx. It will be building an approximately 170,000-square-foot mixed-use facility on vacant, formerly cityowned property at the northern end of the Hub commercial district that will contain retail space and the Department of Finance’s Bronx Business Center. The developer will also renovate a former municipal parking garage between 153rd and 156th streets on Third Avenue in the Bronx.

Related plans to construct a twostory retail and office building and rehabilitate the adjacent parking garage with retail space on the ground floor. The Hub Retail and Office center will be home to retailers including Staples, Rite Aid, and Forman Mills. Related purchased the property from the city for $1 million. The project is expected to be completed next year.

In January, Vornado Realty Trust acquired for $165 million Bruckner Plaza, a 386,000-square-foot shopping center and adjacent parcel containing 114,000 square feet that is ground leased to a third party. The property, on Bruckner Boulevard in the Bronx, is fully leased and anchored by Kmart, Toys “R” Us, and Key Foods.

Another promising mixed-use development site in the Bronx is the Kingsbridge Armory. Last year, the New York City Economic Development Corporation issued a request for proposals for the sale and redevelopment of the 575,000-square-foot landmark building at 29 West Kingsbridge Road. The building could be transformed into a mixed-use facility that would anchor the local community and create a unique destination to attract visitors from throughout the city and the region. The city envisions stores, an inviting park-like perimeter, a movie theater or cultural venue, and reduced-rent space for community organizations.

This summer, Atlantic Development Group will be breaking ground on a 1 million-square-foot mixed-use development on a 4.5-acre site covering 161st through 163rd streets at Third Avenue in the Bronx. The development will have a mix of 750 market-rate and “affordable” residential apartments, and 45,000 square feet of retail space for local and national tenants. The centerpiece of the development is a 120,000-square-foot tower to serve as the Bronx campus of Boricua College, a minority-serving institution as defined by the Office of Civil Rights.

“We have been working on this project for the past three years, and we are happy to be able to develop this valuable project for the community,” the president and cofounder of Atlantic Development Group, Peter Fine, said.

The chairman of Metropolitan Valuation Services, Martin Levine, said retail rents in the Bronx have doubled in some key locations. East Fordham Road, for example, now demonstrates rents as high as $200 a square foot for space that five years ago leased for $100 a square foot. “Given the pedestrian traffic and retail sales potential, $100 a square foot rents in the Hub, Third Avenue and Fordham Center shopping corridors is a bargain by New York City standards,” he said.

As recently reported, Acadia Realty Trust and P/A Associates, through the New York Urban Infill Redevelopment initiative, are developing the Offices at Fordham Place, one of the first mixed-use projects to be developed in the borough in more than a decade. The joint venture is restructuring the historic Sears Building at 400 Fordham Road, directly across the street from Fordham University. The development consists of about 285,000 square feet within 14 stories, including 159,000 rentable square feet of office space, and 126,000 square feet of retail, would provide an addition to the thriving Fordham Road business district. The project is expected to be completed in about 18 months. Sears will be relocated to the basement level and Walgreen’s will be among the other national and local tenants.

In northern Manhattan, Acadia and P/A are redeveloping the historic George Washington Bridge Bus Station into Broadway Marketplace at GWB. The redevelopment expands and enhances the building’s retailing potential with a total of six new levels of merchandising space, which would include 206,000 square feet across four levels. The complex is located in Washington Heights, occupying a full block on 178th and 179th streets between Broadway and Fort Washington Avenue, as well as a second site across the street on Broadway and Wadsworth Avenue.

“The ongoing renaissance in the boroughs will stimulate economic opportunity, increase jobs and transform the neighborhoods throughout the city,” the president & CEO of Acadia Realty Trust, Kenneth Bernstein, said. “Acadia and its partners are excited to play a role in the development of these thriving neighborhoods.”

Last month was an active one for groundbreaking ceremonies for new retail and mixed-use development projects. A few weeks ago, Vornado Realty Trust held its official groundbreaking for the 620,780-square-foot mixed-use and residential complex in Rego Park, Queens. The project is the second phase of Rego Park Center, adjacent to the existing 343,000-square-foot center that includes Sears, Marshall’s, Bed Bath & Beyond, Circuit City, and Old Navy. The new development borders the Long Island Expressway. Major tenants in the $550 million project are said to include Kohl’s, Home Depot, and Century 21 department store. The project will have 400 residential units and a 2,500-squarefoot community room for public use.

Earlier in the month, a groundbreaking ceremony was held for the Arches in Deer Park, Long Island. This “green” shopping facility is being developed by a joint venture of Blumenfeld Development Group, Apollo Real Estate Advisors, Tanger Factory Outlet Centers Inc., and Mark Holdings. “The 800,000 square feet of what we like to call ‘Smart Style’ development incorporates the outlet concept with community based retail, entertainment, dinning, and exceptional architecture,” a principal at Blumenfeld Development Group, David Blumenfeld, said. “It is a race track designed center, meaning the stores are all in the center with parking around the perimeter. It is an outdoor mall with a center courtyard. We have signed leases with Christmas Tree Stores, Niemen Marcus, and Regal Cinemas for a 16-screen theater.” The project is located at the former 750,000-square-foot industrial building once occupied by EDO Corp. It is about 60% leased.

Construction is under way in Flushing by the Muss Development at the 14-acre site in the heart of the downtown, near College Point Boulevard and Roosevelt Avenue. The mixed-use development will feature an 800,000-square-foot retail center, 1,100 residential units, and a 2,500-car parking garage.

With gentrification, economic growth, and a growing population in the city and the region, demand for retail is expected to rise for many years to come.

Mr. Stoler, a contributing editor to The New York Sun, is a television broadcaster and senior principal at a real estate investment firm. He can be reached at mstoler@newyorkrealestatetv.com.


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