Manhattan Retail Market M I D - 1 ST Q U A R T E R 2 0 1 6 R E P O R T

Looking Back - 2015 Retail Activity Notable Lease Transactions As 2015 drew to its closure, retail activity in Manhattan set a new bar. Estimated starting annual rents of the reported top 3-deals as of the end of November surpassed that of 2014 which had boasted a $17 million figure for Microsoft’s 20,600-square-foot lease at 677 Fifth Avenue (Plaza). In addition, 8 of the 9 top deals reported exceeded $10 million in comparison to only 2-deals in the preceding year. The 2-lease deal by Swiss watch firm Swatch Group for 14,700 square feet at the 24,700-squarefoot retail condo at the base of the St. Regis Hotel secured a figure over double that of the Microsoft deal. Swatch’s subsidiary Harry Winston will occupy a portion of the space with the remainder to be occupied by another yet-to-be-announced brand that some sources speculate could by high-end watchmaker Breguet. The condounit owned by Vornado Realty Trust and Crown Acquisitions was acquired in 2014 for $700 million. The acquisition included the adjacent 17,100-square-foot retail townhouse at 697 Fifth Avenue and approximately 26,500 square feet of unused development rights. The Victoria’s Secret lease for a 63,780-square-foot multi-level store at 640 Fifth Avenue (Plaza) will serve as the lingerie retailer’s flagship location. The deal that was reportedly 11-years in the making had an estimated starting annual rent of $34 million. The new store is expected to open before the end of 2016. Tenant

Address

Est.Base Rent/Yr

Swatch Group

697-703 Fifth Avenue

$35 MM

Victoria’s Secret

640 Fifth Avenue

$34 MM

Old Navy

1514-1530 Broadway

$18 MM

Gap

1514-1530 Broadway

Nike

529 Broadway

Bulgari

730 Fifth Avenue

Foot Locker Sephora Sephora

Sq. Ftge.

District

Submarket

14,700

Plaza

Midtown

63,780

Plaza

Midtown

32,500

Times Square

Midtown

$17 MM

31,000

Times Square

Midtown

$16 MM

55,000

SoHo

Midtown South

$16 MM

3,000

Plaza

Midtown

1460 Broadway

$15 MM

36,000

Times Square

Midtown

112 West 34th Street

$11 MM

11,334

Penn Plaza

Midtown

580 Fifth Avenue

$8.5 MM

17,000

Plaza

Midtown

Notable Investment Sales Some of the most expensive transactions reportedly include: Address

Buyer

144-150 West 34th Street Vornado Realty Trust 229 West 43rd Street

Kushner Companies

690 Madison Avenue

Ashkenazy Acquisitions

*Condo

Seller

Sq. Ftge.

Price

District

Submarket

Starwood Capital Grp Crown Acquisitions

77,600

$355 MM

Herald Square

Midtown

250,000*

$295 MM

Times Square

Midtown

6,620

$115 MM

Plaza

Midtown

Africa-Israel USA Five Mile Capital (affiliate) N/A

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Real Estate Board Of New York’s Fall 2015 Retail Report The report released in November by REBNY revealed a year-over-year rise in overall asking rent prices for ground level space in a majority of the major retail corridors. However a softening of the retail market during the last 6-months pushed average asking prices lower, in part due to a jump in retail inventory on the market as supply surpassed a somewhat sluggish demand. The slowdown of retail activity in some neighborhoods has been offset by new residential and office development, creating a higher density of residents and office tenants that continues to attract new retail businesses to the area. Downtown’s ongoing revitalization and robust development activity continues to push rents higher as more and more retailers flock to the Lower Manhattan neighborhood, driving asking rent prices higher as substantiated by the 32% increase over the past 6-months. The Flatiron District’s Broadway corridor also enjoyed gains, where average asking rents for ground level space rose 17% during the same period; despite a more moderate increase from the 42% rise year-over-year. Despite the impressive figures over the past several years, there is a widening spread in rental rates between major corridor retail and “mom-and-pop” districts. Some industry sources estimate that the gap has gone from a 10-to-1 difference to as high as 50-to-1. Average asking rents in the prime 5th Avenue corridor between 49th-59th Streets more than doubled for available ground level space, jumping from $1,631 per square foot in 2009 to $3,683 per square foot according to Spring figures released by REBNY. In comparison “lesstouristy” areas such as 3rd Avenue from 60th-72nd Streets, asking rents rose only 32% from reportedly $275 per square foot during the same period, with side-street asking rents along 3rd Avenue even lower at around $90 per square foot. The corridors profiled in REBNY’s report represent Manhattan’s top tier retail corridors, and the asking rents quoted reflective of available ground level space. It has been furthered pointed out that asking rents are significantly affected by numerous attributes such as location (street/avenue), frontage, ceiling heights, and volume of space availability. The top tier retail corridors serve as the main driver for rent levels; and although the disparity in prices from block-to-block can be extreme, will inevitably help push rents higher in the second- and third-tier corridors.

Sources:

https://www.rebny.com/content/dam/rebny/Documents/PDF/News/Research/Retail%20Reports/REBNY_Fall_2015_Retail%20Report.pdf P.33 P.3

REBNY Retail Report (cont’d) Corridor

Fall 2015 Avg. Asking

Fall 2015 Asking Range

Fall 2014 Avg. Asking

$1,613

$1,000-$2,273

% Yr-over-Yr Change

% Change Spring 2015

Eastside $1,709

-6%

-5%

Third Ave: 60th – 72nd Sts

Madison Ave: 57th – 72nd Sts

$335

$187-$425

$266

26%

-8%

East 86th St: Lexington-2nd Aves

$430

$250-$650

$423

2%

-6%

Broadway: 72nd – 86th Sts

$361

$193-$650

$377

-4%

-7%

Columbus Ave: 66th – 79th Sts

$375

$137-$600

$347

8%

-16% 0%

Westside

Midtown East 57th St: 5th – Park Aves

$1,600

$1,500-$1,700

$1,250

28%

Fifth Ave: 42nd – 49th Sts

$1,203

$1,000-$1,500

$1,095

10%

0%

Fifth Ave: 49th – 59th Sts

$3,397

$3,093-$3,700

$3,420

-1%

-8%

Broadway & 7th Ave: 42nd – 47th Sts

$2,390

$2,000-$3,000

$2,317

3%

-1%

Herald Square West 34th St: 5th – 7th Aves

$836

$550-$1,100

$891

-6%

-16%

Fifth Ave: 14th – 23rd Sts

$394

$325-$500

$403

-2%

-2%

Broadway: 14th – 23rd Sts

$510

$417-$650

$359

42%

17%

$831

$425-$1,583

$830

0%

-15%

$468

$325-$550

$484

-3%

-3%

$372

$300-$600

$339

10%

0%

$308

$115-$500

$265

16%

32%

$132

$75-$225

$130

2%

-6%

Flatiron

SoHo Broadway: Houston – Broome Sts West Village Bleecker St: 7th Ave South – Houston St Meatpacking 14th St: 9th – 10th Aves FiDi Broadway: Battery Park – Chambers St Harlem 125th St: Hudson – East Rivers

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Center for an Urban Future - State of the Chains, 2015 A report released by the New York City-based policy institute reveals a slowdown in growth of chain store outposts throughout New York City in contrast to the more robust expansion during 2014. Despite 7-consecutive years of increasing numbers of national chain stores in the city’s 5-boroughs, year-over-year statistics compiled for 2015 resulted in a mere 1% increase, compared to 2.5% the previous year — the lowest over the 7-year period with the exception of 2013. Amongst the brands listed in 2014, 300 expanded during 2015 from 7,473 stores to a total of 7,550-stores. Overall, the percentage of national retail chains that increased their footprint in the city by at least one store during 2015 was comparable to that of 2014 based upon respective annual lists of retailers. A total of 30% reduced their footprint in 2015; 37% remained unchanged; and (5) brands no longer have any presence in the city, having closed all their outposts during 2015. Dunkin Donuts continues to lead the way in the number of city outposts with a net increase of 6% year-over-year; and although Subway has maintained its 2nd-place title, the food chain decreased the number of locations by 18-stores. National Retailer

Total Stores

National Retailer

Total Stores

Dunkin Donuts

568

McDonald’s

232

Subway

444

T-Mobile

217

MetroPCS

323

Baskin Robbins

214

Duane Reade/Walgreens

307

Rite Aid

197

Starbucks

307

GNC

175

The largest year-over-year expansions among the city’s roster of national retailers included: National Retailer

Expansion

Total Stores

Expansion

Total Stores

Sprint

150%

70

Chipotle

16%

58

T-Mobile

19.9%

217

Sunglass Hut

30%

30

MetroPCS

11.4%

323

Checkers

25%

35

GNC

12.2%

175

Fossil

175%

11

47%

25

Le Pain Quotedien

20%

36

Nathan’s

National Retailer

While Manhattan is currently home to 2,807 national chain stores, year-over-year change resulted in a 1.2% decrease bringing the number down to 2,804. The Bronx boasted the largest percentage of expansion totaling 3.3% year-over-year for a total of 944 stores in the borough, followed by Brooklyn and Queens with a 2.6% growth totaling 1,633 locations and a 0.8% growth totaling 1,749 locations respectively. Staten Island incurred the sharpest decline of 1.2%, resulting in a reduced total of 420 stores. National chains that reduced their footprint in the city included: National Retailer

Reduction

Total Stores

National Retailer

Reduction

Total Stores

Cold Stone Creamery

73.3%

4

Crumbs Bake Shop

30.4%

16

Ashley Stewart

50.0%

8

Nathan’s

29.2%

17

Blimpie

30.0%

14

Verizon Wireless

16.7%

35

Sources:

https://nycfuture.org/pdf/State-of-the-Chains-2015.pdf

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Nordstrom’s Anticipated Arrival Sparks Shift in Retail Landscape Although still a few years off in the horizon, Nordstrom’s New York City debut in a 7-floor space at the base of the eponymous named Nordstrom Tower, 217-225 West 57th Street is reportedly projected to heighten retailer interest in the Broadway corridor from West 57th Street down to Times Square. In anticipation of potential heightened competition, the Seattle-based luxury department store is reportedly also considering the lease for a 39,718-square-foot multi-level space currently available at 3 Columbus Circle (1775 Broadway) which is directly across from its Broadway entrance; plus the roughly 4,775-square-foot prime space at the corner of West 57th Street and Broadway currently occupied by a Bank of America branch. Sources anticipate that the retailer would use the space for one of the company’s other brands — Nordstrom Rack, Treasure & Bond, or a brick-and-mortar outpost for Pop In@Nordstrom which features ever-changing line-ups. Although it may be slow to change, the opening of Nordstrom along with the influx of high-end residential condominiums that are lining up along 57th Street — more commonly now known as “Billionaires’ Row,” is projected to give a boost to the corridor currently filled with a collection of ordinary city staples as foot-traffic increases and pedestrian patterns change pushing retail values higher. Tenants such as the London-based toy retailer Hamleys, and a new concept from National Geographic that is reportedly seeking space in Times Square may broaden their search northwards as larger blocks of retail space come online. •

1710 Broadway – A planned 60-story, nearly 400,000-square-foot project at West 54th Street being developed by C&K Properties and Extell Development that is expected to be a mix residential condominiums and hotel space, will likely include new retail at its base according to sources.

•

1865 Broadway – The planned construction by AvalonBay Communities of a 32-story, 343,000-square-foot mixed-use development at West 61st Street will include close to 70,000 square feet of retail space spread across 2-ground and 2-sub levels of space.

•

1633 Broadway – Construction of a street-level glass cube is already underway at the Paramount Group tower that spans the entire block-front between West 50th- and 51st Street . The new entry way that will closely liken to technology giant Apple’s cube on 5th Avenue at the GM Building, 767 Fifth Avenue, will create a striking entry to the 39,588 square feet of lower level and concourse retail space currently available.

•

1619 Broadway – The roughly 45,000 square feet at the Brill Building on West 49th Street was recently overhauled, adding the 3rd and 4th floors to create a retail space spread across 4-levels. Approvals have been secured for the installation of LED signs along the lower façade of the landmarked property. Rights to the operation of the signage will belong to ownership and can be leased to a retail tenant, or sold for ad space. It had been reported during the summer that contract vendees Brill Holdings, a partnership of B+B Capital, Israeli firm Fox-Wizel, Conway Capital, and Schottenstein Realty, were in negotiations with both FAO Schwarz and sister company Toys “R” Us for a co-branded store after a pending deal at 1633 Broadway fell through.

•

1604-1610 Broadway – The up to 31,656 square feet of retail space at West 49th Street spread across 5-floors offers the potential for billboard signage.

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Sluggish Pre-Holiday Sales Leave Retailers’ Shelves Overstocked A growing trend of weaker consumer spending had left shelves inundated with inventory for many department stores as the holiday season neared, making it an ideal shopper’s market with larger-than-expected discounts that were anticipated to potentially make it harder for department store chains to reach earning targets. Specialty stores and apparel manufacturers are also feeling the effects of softening retail sales. Brands such as Lululemon Athletica, Nike Inc., Under Armour Inc. DSW, Dicks Sporting Goods, Skechers U.S.A; and VF Corp. which includes numerous brands such as Nautica, 7 For All Mankind and The North Face had incurred a growth in inventory that exceded sales according to some reported retail analysts’ forecasts at the onset of the 2015 holiday season. Some companies justify the high surplus of inventory, claiming that it actually aided sales; while others plan to open additional stores, or delayed orders for previously hard to acquire brands finally came through. An analysis of consumer spending patterns in November reportedly revealed that the majority of disposable income is going towards electronics, cars and home items, versus the purchasing of apparel which has recently remained low. Store inventory is typically purchased about 6-months in advance of the season, allowing for little ability to adjust for short-term changes in demand – such as this fall’s unusually warm temperatures curbing shopper’s need for sweaters, coats and other cold-weather goods. As a result, some overstocked stores were expected to head into the holiday season with new fullpriced holiday merchandise competing with discounted goods. Although macroeconomic signs that would typically set the stage for healthy holiday spending — lowering unemployment, gas prices remaining low, and high consumer confidence, a November forecast by the National Retail Federation projected a 3.7% rise in consumer spending versus the higher 4.1% gain of the previous year. Although representing a decline in sales, 2015 projections remain above the 2.5% average increase for the past 10-years. The report by the retail trade association further projected that nearly 46% of holiday browsing and buying would take place online as consumers become more reliant on digital shopping, further substantiating the importance of today’s retailers offering a seamless Omni-channel experience between in-store, online and mobile shopping access.

Sources:

https://nrf.com/news/goodbye-halloween-hello-holidays • http://www.wsj.com/articles/retailers-full-shelves-may-force-holiday-discounts-1447202784

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Retail Activity In The News Pop-Ups Go High-Tech Pop-up stores that have been popular with retailers and landlords, typically requiring a short-term commitment while temporarily filling vacant storefronts, may be taking on a new look. Freestanding high-tech pods dubbed ShopWithMe that can be reproduced and installed across the globe were on display in Chicago; and one is reportedly headed to the city for the National Retail Federation’s BIG Show at the Javits Center in January. The “smart store” pods that can house more than one brand at a time are intended to offer shoppers engaging, interactive technology that can be controlled by the ShopWithMe app. Interactive screens allow customers to access a brand’s catalog to search for additional sizes or products for immediate purchase followed by a later delivery. In addition the mobile app also provides instant check-out, eliminating checkout lines. Each pod can be set up or stowed quickly, and consist of (4) self-contained units connected by a 43-foot-long bridge that can host as many as 10-different brands; and HVAC systems handle both heating and cooling according to reports. Retailers such as online retailer Zappos, TOMS Shoes, Harley Davidson Black Label, and eco-friendly fashion brand Raven + Lily have tested the concept, integrating their products into a pod for an event or short-term location.

Pop-up Pod Rendering

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In The News (cont’d) Supermarket Survival – A Heightened Need Keep up with Trends Traditional supermarkets in Manhattan are increasingly facing challenges as they try to endure amidst newer stores such as Whole Foods and convenient rapid delivery services such as Instacart and AmazonFresh. Further threatening the survival of the more traditional supermarket is the growing trend of big-box drug store chains such as CVS and Duane Reade creating in-store mini-markets. The recent bankruptcy of the Great Atlantic & Pacific Tea Company (A&P) triggered the closure of all 10 of the company’s Manhattan Food Emporium stores. The Gristedes chain owned by the Red Apple Group only grosses about $200 million in revenue, and loses a “few million” a year after operating costs. At the peak, Red Apple boasted a total of “nearly 100” supermarkets in Manhattan amongst the company’s Gristedes, Red Apple and Sloan’s brands, but only 31 Gristedes locations currently remain. Red Apple is currently investing about $10 million to revitalize the stores in the hope of increasing sales according to reports. In contrast Whole Foods, which entered the Manhattan market in 2001, currently has 8-locations with 2-more planned openings on the horizon — 3 Bryant Park (1095 Sixth Avenue) in Midtown, and 100 West 125th Street in Harlem. The Texas-based chain brought a fresh look to food markets that has successfully generated a reported 6% increase in national sales year-over-year in 2015, reaching a total of $3.4 billion. The offering of quality, pre-cooked meals has been one of the strengths of Whole Foods as city residents are cooking less, but don’t want to trade off convenience for healthy meals. Efforts to stay on top of changing trends have led to a partnership with Instacart, which provides a personal grocery shopper and quick delivery service for the items customers select online; and the launch of a smaller store model offering less expensive products branded 365 by Whole Foods. Another potential newcomer to the Manhattan market could be Wegmans Food Market. Similar to Whole Foods the chain offers farm-tomarket fresh produce, in part from their own organic farm along with partner-growers. The Rochester, NY-based grocer is slated to open its first New York City outpost in 2017 at Steiner NYC’s Brooklyn Navy Yard Project. The establishment of an identity has become crucial in today’s continually changing times. Responding to the need to evolve some stores such as the Key Food Stores Co-operative, which is known for selling inexpensive products, have been successful in adapting. The Staten Island-based brand of individually-owned supermarkets has had success with its high-end spinoffs 55 Fulton Market and Urban Market which will be opening their first Manhattan store at Lower Manhattan’s 70 Pine Street. The family-owned supermarket Morton Williams has also adapted to keep up with current trends, entering the prepared food market as well as selling organic products. In addition the grocer with 12-locations in Manhattan and 2 in the Bronx began offering online shopping with the convenience of either 2-hour delivery or in-store pickup. Staying ahead of the crowd has also become essential amongst the grocery delivery service companies. FreshDirect, New York’s homegrown grocery delivery service that for the most part controlled the majority market share of the city’s customers since pioneering the business in Long Island City, Queens in 2002, has been confronted by increasing competition as several newcomers enter the directto-consumer market. Max Delivery which launched 10-years ago in TriBeCa utilizes a fleet of bicyclists to deliver farm fresh and organic products, and is looking to expand into Brooklyn and other cities. Currently operating solely online, the company is planning to add a walkin component that will allow consumers to place orders at a brick-and-mortar outpost for onsite delivery. As consumer grocery shopping patterns change with more and more people shifting from bulk buying to just enough for the next day or two; as well as seeking heightened delivery convenience, traditional supermarkets will need to find ways to adapt if they are to endure.

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In The News (cont’d) NYC on Big Box Pharmacy Overload The multitude of drugstores that line Manhattan’s blocks gives rise to the question, “How do they all survive?” Some sources account the ability of chains such as Duane Reade, Walgreens, Rite Aid and CVS Pharmacy being able to maintain numerous outposts because they cater to different consumer types; and have made intelligent real estate decisions that have furthered their ongoing success. CVS typically takes a corner space that provides 2-sides of frontage according to some sources; while New York-born Duane Reade, that is a dominant force in the city, has reportedly employed the strategy of snapping up mom-and-pop pharmacies as well as tons of leases to box the competition out, ultimately subleasing the stores they don’t utilize. In addition Duane Reade is an urban model which gives the chain the advantage of being flexible with store layout to work within the city’s varied floor plates, versus the other brands which come from suburban markets and less willing to compromise size. Currently, Duane Reade leads the way with over 83 Manhattan outposts, CVS follows with 44, Rite Aid has 29 locations, and Walgreens has 12. Competition from supermarkets, club stores, and other merchants such as Walmart and Amazon has been confronted by a run of mergers — Rite Aid acquiring Eckerd and Brooks drugstore chains in 2006, Walgreen’s acquisition of Duane Reade in 2010 plus the recently announced agreement to acquire Rite Aid. Due to the launch of the Obamacare / Affordable Care Act, the big-box chains are reducing the focus on prescription pharmacies that used to drive business, and pushing other goods in the forefront as they evolve into broader convenience stores to achieve higher margins. Looking ahead it is anticipated that some may even abandon pharmacy services at outposts where they maintain a full-service location nearby; as well as the creation of a smaller more express store model. Additionally, to compete with walk-in clinics that have grown in numbers, space for a doctor’s office and the addition of services like a doctor on call may be added.

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In The News (cont’d) Macy’s Seeks to Cash In on Real Estate Holdings The multi-national holding company based in Cincinnati, OH (formerly Federated Department Stores) will be taking a course of action to improve cost-efficiency intending to facilitate future growth and regain market share in the company’s core Macy’s and Bloomingdale’s omni-channel businesses. Currently operating under brand names Macy’s, Bloomingdale’s, Bloomingdale’s Outlets, Macy’s Backstage and Bluemercury, efforts to increase fiscal earnings expected to be implemented this year are expected to generate savings of approximately $400 million in annual SG&A (selling, general and administrative expenses) beginning 2016: •

Consolidating the grouping of existing Macy’s stores into five regions and 47 local districts (down from the current structure of seven regions and 58 local districts);

•

Adjusting staffing levels at each Macy’s and Bloomingdale’s store in line with current sales volume to order to increase productivity and improve efficiency;

•

Implementing a voluntary separation opportunity for about 165 senior executives in Macy’s and Bloomingdale’s central stores, office and support functions who meet certain age and service requirements and chose to leave the company beginning in spring 2016;

•

Reducing an additional 600 positions in back-office organizations;

•

Consolidating the (4) existing Macy’s, Inc. credit and customer services center facilities into three;

•

Decreasing non-payroll budgets company-wide in areas such as travel, meetings and consulting services.

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In The News (cont’d) Macy’s (cont’d) In addition: Store Closings – The intended closing in early spring 2016 of 36 Macy’s stores from amongst the current 770, having already closed 4 last year. The total 40 stores account for approximately $375 million in annual sales with the revenue loss expected to be offset by increased sales in nearby stores and with online/mobile sales. However the closures have triggered concerns of the effects on the commercial mortgagebacked securities (CMBS) market. Recently released information compiled by financial information providers Trepp and Morningstar Credit indicate that over $530 million in CMBS debt could be affected by Macy’s announcement, prompted by anticipated large vacancies amongst regional mall locations that collateralized CMBS deals where the retailer is typically one of the anchor tenants — some of which are already in financial trouble and defaulted on loans. Macy’s as a whole is reportedly a tenant at properties securing 140 CMBS loans with unpaid debt totaling $118.5 billion. Store Openings – In part offsetting some of the planned closures, there are 5-new Macy’s and Bloomingdale’s stores in different stages of planning and construction. In addition, about 50 new locations for the newly launched off-priced Macy’s Backstage stores will be opened over the next 2-years, having made their debut last year; as well as about 40 freestanding Bluemercury stores. The beauty product chain’s 62-stores were acquired by Macy’s in March 2015. Real Estate - The U.S. department store chain is seeking to form partnerships or joint ventures by selling stakes in its flagship stores located in Manhattan, San Francisco, Chicago and Minneapolis, plus its mall-based properties. The decision comes amidst pressure from some investors pushing the retailer to further capitalize on its real estate holdings. Macy’s Herald Square opened in 1902, expanding in 3-phases through 1931 to its current 2.2 million square feet spanning an entire city block. Recently a 4-year, $400 million major renovation project was completed at the 34th Street flagship. As the company begins to explore all viable avenues to create shareholder value from its real estate holdings, rumors surfaced that a possible vertical alteration of the Herald Square store for hotel or office use is being considered — although a long shot that would require rezoning approvals for the site that is reportedly overbuilt by about 800,000 square feet. Some sources further pointing out that the structure which is a National Historic Landmark would likely be denied any major façade changes. New York developer Tishman-Speyer has already expressed interest in pursuing a partnership on the 4-flagship locations, having already ventured with Macy’s last year upon agreeing to pay $170 million in cash for the 5-upper floors of the retailer’s 9-story building in Downtown Brooklyn; also agreeing to purchase Macy’s Hoyt Street garage which offers the potential for a mixed-use development. The deal that was expected to close before the end of 2015 would result in the planned redevelopment of the upper portion of the building at 422 Fulton Street into 10-floors of office space.

Following in similar footsteps, retail giant Walmart is reportedly closing 269 stores, including those under the Express, Neighborhood Market, and Supercenter names. News of the closures by both Walmart and Macy’s brings attention to how significantly the retail landscape has changed as more customers shop online amongst a wider selection of purchasing options. Although stores remain a vital part of the retail mix, they have lost some of their relevance in today’s world of omni-channel retailing.

Sources:

http://phx.corporate-ir.net/phoenix.zhtml?c=84477&p=irol-newsArticle&ID=2126953

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In The News (cont’d) Port Authority Bus Terminal’s Retail to Get a Makeover tail space, plus another 13,000 square feet along 9th Avenue, at the transportation hub that reportedly services 125,000 people per day will be undergoing a re-tenanting and a brightening up. In addition the 10 Hudson News stores will be re-modeled to match the terminal’s new retail design and be replaced with convenient grab-and-go stores similar to those at airports. Some new stores will be created near an entrance area which will be opened up by the relocation of buses; and ticketing locations already moved to make way for additional improvements such as upgrades to ceilings, mechanicals and Wi-Fi. A new food court will open offering a wider variety of eating options to be operated by OHM Concession Group having signed a 10-year lease for roughly $15.2 million with the Port Authority of New York & New Jersey (PANYNJ). The repositioned 5,943-square-foot space will replace a Deli Plus outpost and the U.S. Postal Service which was expected to close at the end of January, while the Jamba Juice will be relocated.

Health and Fitness Dominate Upper East Side 3rd Avenue Corridor Acadia Realty Trust had plans to reposition the 5-story, 13,820-square-foot office building at 1151 Third Avenue (aka 201 East 67th Street) for medical use upon acquiring the property at the corner of East 67th Street for $18 million in late 2013. However the increasing trend to strive for health and fitness amongst today’s city dwellers took control of the building’s use direction. Current tenants occupying each of the 2,528-square-foot floors at the fully leased property include spinning studio Flywheel on the entire 2nd and 3rd floors; SLT (Strengthen Lengthen Tone) occupies the entire 4th floor; and the Fhitting Room on the 5th floor.

Other fitness facilities and related retailers along the strip between 65th- and 72nd Streets include Nike Running, 1131 Third Avenue, Reebok FitHub, 1132 Third Avenue, Lululemon Athletica, 1127 Third Avenue, Super Runners Shop, 1244 Third Avenue, and Boom Fitness, 1438 Third Avenue.

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City’s Upscale Food Courts in Expansion Mode The popularity of food courts that are popping up throughout the city is expected to bring continued growth in numbers; although some skeptics warn of a possible over-saturation that may result in the concept losing its luster. Existing markets offering gourmet and artisanal foods currently include The Chelsea Market, 75 Ninth Avenue, Gotham West Market at 550 West 45th Street, City Kitchen at Row NYC, 700 Eighth Avenue in Times Square, Plaza Food Hall in the lower level of the Plaza Hotel, 1 West 59th Street, Berg’n at 899 Bergen Street in Brooklyn’s Crown Heights neighborhood. Eataly currently located at 200 Fifth Avenue in Midtown South, will be adding a second outpost this year in Lower Manhattan’s 4 World Trade Center; joining Hudson Eats and Le District at Brookfield Place. Some operators of existing food courts are planning to open additional locations such as: Gansevoort Market – Currently located in Midtown South’s MePa district at 52 Gansevoort Street, the food court that opened in 2014 will be relocating nearby to a 12,000-square-foot outpost at 351-353 West 14th Street due to redevelopment plans of its current location reportedly into the new home for the brasserie-style restaurant Pastis. Ownership of the Gansevoort Market plans to create additional similar venues, currently considering Lower Manhattan and Bronx’ Grand Concourse neighborhood; as well as working with the developers of the Empire Stores at 55 Water Street in Brooklyn’s DUMBO neighborhood for a possible 10,000-square-foot food hall at the mixed-use project. The new outposts will go under the brand name “Mrkt;” although each will be slightly different. Gotham West Market – Operators the Gotham Organization are reportedly planning to open a similar food market in the Fort Greene neighborhood of Brooklyn sometime this year. Pennsy at Pennsylvania Avenue – Vornado Realty Trust is planning to create an 8,000-square-foot food court that is expected to open this year. It will be located at the base of 2 Penn Plaza offering eateries by world famous chefs. The new food court will fill space that was formerly home to long-term tenant Borders book store which shuttered in 2010. Other similar markets on the horizon include: Food Hall, 10 Hudson Yards aka 501 West 30th Street – Manhattan restaurateur Danny Meyer is reportedly considering the creation of an over 40,000-square-foot market concept on the Far West Side. Bourdain Market, “Superpier” Pier 57 – American chef celebrity Anthony Bourdain is planning to bring a 100,000-square-foot food stall market to the Chelsea pier located between 15th- and 16th Streets. Jean-Georges Vongerichten / South Street Seaport (FiDi) – The world-renowned restaurateur signed a lease with Howard Hughes Corporation for 40,000 square feet. The newly created open food market will be housed in the landmarked Tin Building that will undergo a restoration by the developer.

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Lower Manhattan Food Choices on Overload, Puts Nabe on the Map Downtown’s best kept secret will soon be out as the neighborhood that lies south of Chambers Street sees a growing number of worldfamous chefs and restaurant owners that are poised to open locations in the Lower Manhattan area. The neighborhood’s growing population of 62,000 (including Battery Park City) is up from the 5,000 figure in the late 1990s, but whether or not it will be enough to sustain the swelling number of food options expected to add 5,000 additional seats — many of which are pricier, will serve as a test for Downtown. Restaurants which run on narrower profit margins face more significant challenges than a retail store, however some of the new arrivals will benefit from a somewhat reduced risk of being located within an office building, hotel, or mall where landlords have assisted with the expense of build-outs. New food options will include both larger markets, as well as a collection of restaurants in some untested sites such as the yet-to-be-named 4-level, 7,500-square-foot dining and drinking venue by owners of the popular Spotted Pig. The new eatery will be located on the upper floors of the recently converted 70 Pine Street in the Financial District that will host a mix of residential and extended-stay units. Jean-Georges Vongerichten / South Street Seaport – The world-renowned restaurateur signed a 40,000-square-foot lease with Howard Hughes Corporation, intending to create an open food market within the soon-to-be restored landmarked Tin Building. An additional deal for 10,000 square feet that includes a 2,500-square-foot patio will bring a seafood restaurant to the 2nd-floor of the new 365,000-square-foot Pier 17 that is currently under construction. Eataly / 4 World Trade Center – The popular Italian-themed market is slated to open the 40,000-square-foot market in April on the tower’s 3rd floor. Le District / Brookfield Place – The French-themed market spread across 30,000 square feet opened this year beneath the 35,000-squarefoot food hall dubbed Hudson Eats which opened in 2014. Harbor House / Pier A, 22 Battery Place – The renovated historic pier that formerly served as the headquarters for the New York Harbor Police now offers an array of dining spread across 28,000 square feet that opened last year.

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Lower Manhattan Food Choices (cont’d) Industry Kitchen – The new 5,000-square-foot indoor/outdoor eatery and bar that sits along the East River esplanade beneath the FDR Drive at 70 South Street opened last spring. Wolfgang Puck / 30 Park Place – The chef and restaurateur will debut his first New York City concept, CUT by Wolfgang Puck within the mixed-used development comprised of a Four Seasons Hotel and residential condominiums. The new eatery is slated to open July 2016. Nobu / 195 Broadway – The restaurant is relocating from its current location of 20-years at 105 Hudson Street in TriBeCa; and expected to open the new 14,384-square-foot restaurant in early 2017 in the lobby of the former AT&T building. Tom Colicchio & Keith McNally / The Beekman, 5 Beekman Street – Both the Craft restaurant founder and 30-year restaurateur veteran — creator of Balthazar and Pastis, are planning to open a lounge and 90-seat restaurant within the redeveloped high-end condo. Nammos by the Sea / Battery Maritime Hotel – Owners of the famed beach restaurant located on the waterfront of Mykonos, Greece are planning to open a restaurant and rooftop bar in the 67-key hotel being constructed atop the landmarked Battery Maritime Building. Wylie Dufresne/ A K A Wall Street, 84 William Street – The chef is planning to open a new yet-to-be-named restaurant next year in the hotel development that is currently under construction; and will be unlike the chef’s recently closed wd~50. Some restaurants that opened in recent years, such as Danny Meyer’s North End Grill and Blue Smoke, along with Stephen Starr’s El Vez which are situated at the base of the Goldman Sachs-owned Conrad Hotel, have been successful due to patronage by Battery Park City residents and Goldman Sachs employees. It is anticipated that Lower Manhattan’s ongoing transformation from a predominantly financial sector to a wider diversity of industries that now include several businesses amongst the creative sectors will support a greater variety of dining and food options. Unlike the financial sector they typically favored steakhouses such as Delmonico’s and Bobby Van’s Grill & Steakhouse, the creative sectors bring a more culinary adventurous palate to the neighborhood. In addition, several hotel projects in different stages of planning and development are expected to deliver 3,460 new hotel rooms on top of the area’s current 5,225-keys, attracting a higher number of tourist-stays to Downtown that will potentially further increase restaurant patronage throughout the area.

Source:

http://www.nytimes.com/2015/06/24/dining/manhattan-restaurants-downtown-renaissance.html?_r=0 http://ny.eater.com/2015/6/9/8753925/wylie-dufresne-to-open-hotel-restaurant-in-the-fidi-floyd-cardoz

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Despite Winter Chill Harlem’s Restaurant Scene Blossoms The much anticipated opening of the new Whole Foods at 100 West 125th Street is just another sign of Harlem’s renaissance. When the popular food market opens it will join a growing line-up of restaurants and eateries that are transforming the Upper Manhattan neighborhood to a more upscale retail destination. While some restaurant owners are happy about Whole Food’s debut and the potential for increased foot traffic, concerns of rising rents have surfaced despite neighborhood small business association Harlem park-to-park working with Whole Foods on a variety of neighborhood programs. Harlem is undergoing a shift in demographics and a jump in median income of the area’s residents which have grown in numbers. Classic soul food restaurants such as Amy Ruth’s and Sylvia Woods have given way to mix of culinary offerings over the last few years amongst which some reportedly continue to strive for affordability in order to establish themselves as a true neighborhood spot. Some of the newer arrivals that are lining the corridor stretching from 116th to 125th Street between Frederick Douglass Boulevard and Lenox Avenue include: •

Row House, 2128 Frederick Douglass Boulevard – (have logos) The New American restaurant opened last year on the corner of West 115th Street. The proprietors also own nearby Harlem Tavern, 2153 Frederick Douglass Boulevard which they opened about 6-years ago, but were prompted to open “something a little more refined” as a result of the neighborhood’s changes.

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Bodega 47, 161 Lenox Avenue at West 118th Street was repositioned by ownership into an upscale “Mission-style” Mexican eatery rebranded as Sexy Taco Dirty Cash.

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Chaiwali, 274 Lenox Avenue at West 124th Street is a 2-story Indian tea house.

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Babbalucci, 331 Lenox Avenue at West 127th Street offers Italian-American cuisine featuring wood-fired pizza.

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BLVD Bistro, 239 Lenox Boulevard at West 121st Street offers a Southern-inspired menu within the historic brownstone.

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Maison Harlem, 341 St. Nicholas Avenue at West 127th Street offers a French Bistro style menu.

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Flat Top, 1241 Amsterdam Avenue at West 121st Street offers a café/bistro eatery with n eclectic mix of West Coast, Asian, French, and Italian flavors.

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Harlem Café, 285 St. Nicholas Avenue at West 124th Street will be opening having leased 5,000 square feet for the corner space across from the Harlem USA Shopping Center. Several vacant storefronts were combined to create the space for the new eatery whose current name is subject to change.

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Leasing Activity New to Market 550 Madison Avenue (Plaza) – Electronics firm Sony will be closing its 25,451-square-foot outpost of nearly 22-year at the base of the former Sony Tower. The closure was prompted by the company’s sale of its former headquarters roughly 3-years ago to developers Chetrit Group and Clipper Equity for a mixed-use redevelopment. Although dating has yet to be announced, Sony will be opening a new store at the base of 11 Madison Avenue (Flatiron) as the relocation to the company’s new 550,000-square-foot headquarters draws near. The space is comprised of both conventional retail and restricted use areas. The retail store features 84-foot ceiling heights and divides 1,958 and 3,048 square feet facing East 55th and East 56th Street respectively on the ground level plus a 10,533-square-foot basement. The 10,000 square feet spread across the 2nd and 3rd floors which is restricted to cultural use was utilized as a technology and entertainment museum known as Wonder Lab. The asking rent will reportedly exceed $1,000 per square foot. 131 Greene Street (SoHo) – Internet giant Google has introduced 5,442 square feet of multi-level retail space with 24-feet of frontage to the market. The space which is comprised of 2,094 square feet on the ground level, and 3,348 square feet of lower level selling space has a sublease term that runs to August 2024, with possible lease term available. News of Google seeking a location was initially reported back in March 2014, intending to utilize the space to showcase products such as smartphones, computerized eyewear and laptops where they now have an expanded reach. The company’s search was reportedly focused on finding a location that would be in the vicinity of rival technology giant Apple’s first New York City outpost at 103 Prince Street, on the corner 131 Greene Street - Rendering of Greene Street. The current asking rent is $2.25 million per year ($413 per square foot) for the space which Google had invested roughly $6 million to renovate. As part of the renovations, a portion of the ground floor was removed to create a sunken area with soaring ceilings, glass skylights, and large windows. The company’s apparent abandoning of earlier plans to open a first-ever store in New York City seems to come at a time when Google has shifted its focus towards a large space at the west side Pier 57 project dubbed SuperPier, despite rival companies such as Apple, Samsung, Microsoft, and more recently Amazon joining the world of “in-person” selling. Google reportedly signed a 15-year lease for 250,000 square feet at the former Marine and Aviation building, initially signing a letter of intent (LOI) back in May. Although the company’s plans for the space have not been disclosed, some sources speculate that similar to the intended use of the SoHo location, at least a portion of it may house a showroom to display innovative projects on a larger scale; while others point out that prominent signage may have been the driving force prompting a shift towards the pier space, potentially offering significant branding exposure for the company that makes very few consumer products.

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Leasing Activity Lease Deals to Watch For Starbucks / 860 Washington Street (Chelsea/MePa) – The coffee purveyor is reportedly in late-stage negotiations to lease roughly 25,000 square feet for the company’s 2nd Starbucks Reserve Roastery and Tasting Room — the first located in its headquarter city of Seattle, WA. If the lease finalizes by the end of January as expected, Starbuck’s restaurant, café and lounge would occupy the entire retail component at the base of the 12-story, 125,000-square-foot mixed-use development currently under construction by codevelopers Property Group Partners and Romanoff Equities. The space that features 25-foot ceiling heights and 240-feet of frontage is comprised of 10,900 square feet of ground level space at an asking rent of $300 per square foot, 9,400 square feet on the 2nd floor at $600 per square foot asking, plus 5,115 square feet on the lower level. The new Midtown South outpost would reportedly be one of the largest Starbucks locations in the world. In November it had been reported that electric car manufacturer Tesla had been considering an 11,000-square-foot outpost, but talks apparently broke down.

Lease Deal Highlights Saks 5th Avenue Double Header deals – Hudson’s Bay, the parent company of luxury department store will be opening 2-more locations in Manhattan as a result of deals announced in recent months. •

Saks OFF 5TH / 135 East 57th Street (Plaza) – The off-priced division of Saks 5th Avenue will be making its Manhattan debut in a 56,000-square-foot outpost in March. The 16-year deal came as a surprise to most, anticipating that the already planned 2017 opening of the store at 1 Liberty Plaza in Lower Manhattan would claim title to its Manhattan launch. The uptown store had a reported asking rent of $120 per square foot; and will only have a 2,000-square-foot ground level presence, with the majority of the selling space spread across 2-concourse levels that are below grade. The deal comes as a boost to the East 57th Street retail corridor which has struggled, despite lying adjacent to the Park- and 5th Avenue corridors that boast a line-up of several luxury fashion retailers such as Prada, Chanel, Breitling, Burberry, Tourneau and Turnbull & Asser. The space that sat vacant for nearly 3-years was formerly home to 51-year old off-priced retailer Daffy’s which went out of business in 2012, shuttering all its locations. The off-priced brand’s recent rapid-rate of expansion gives rise to some concerns of the effect its discounted offerings will have on Saks’ full-line store located in the vicinity at 611 Fifth Avenue between 49th- and 57th Street, as they both compete for sales. A similar situation will arise in Lower Manhattan with the anticipated openings of both stores to be located almost directly across the street from each other. The full-line Saks 5th Avenue is slated to open in 2016 at Brookfield Place, followed by the OFF 5TH store opening a year later.

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Saks Fifth Avenue – Men’s Store / 4 Brookfield Place, 250 Vesey Street (World Trade Center) – The new 16,750-square-foot outpost will bring the total number of Saks-branded stores in the Downtown neighborhood to (3) as a result of the deal announced in mid-December. The majority of the space was intended for a L’Atelier de Joël Robuchon French restaurant and casual café before the renowned chef decided to back out of the 2014 deal, plus an additional 4,000 square feet. The significance of the deal is the rate of rapid turnover that a new deal was secured upon becoming available at the Brookfield Place complex. The men’s store is expected to open in March 2017, following the opening of Saks’ main store in 85,000 square feet at the complex’ 225 Liberty Street in the summer of 2016.

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Leasing Activity (cont’d) Lease Deal Highlights (cont’d) Bulgari / 730 Fifth Avenue (Plaza) – The Rome-based luxury retailer will be extending their stay of the Crown Building for another 15-years, but in a significantly downsized space as part of the negotiated new lease at current market rents. Bulgari’s current 9,675-squarefoot store spreads across 3,675-square-foot on the ground floor, and a 6,000-square-foot upper level, but will now occupy only a portion of the ground level space at the corner of East 57th Street. The property made headlines earlier this year, selling for $1.78 billion ($4,861 per square foot). Located at the city’s most expensive real estate crossroads with Bergdorf Goodman, Tiffany, and Louis Vuitton on the other 3-corners, the high price the sale commanded was due to the potential value of the approximately 35,000 square feet of retail space at the tower’s base which in addition to Bulgari is currently home to a Bank of America branch, Piaget and Mikimoto. Land Rover / 639 Eleventh Avenue (Hell’s Kitchen/Clinton) – The automaker signed a lease for 25,000 square feet spanning the entire 5-story planned showroom/office development by owner Sam Ruvinsky. Plans were filed in August for the project that will replace an existing Sunoco gas station. The new “virtually column-free” building will feature 18-foot ceilings upon expected delivery next year. The new outpost will apparently become the 2nd in the vicinity, as a result of a recently signed lease by BNF Automotive Group that will keep Land Rover’s existing location at 787 Eleventh Avenue. The luxury brand was expected to vacate the space in early 2017 as a result of the building’s sale. BNF Automotive Group / 787 Eleventh Avenue (Hell’s Kitchen/Clinton) – The firm reportedly signed a lease for 265,000 square feet at the tower in a deal that will see automaker brands Jaguar and Land Rover remain at the building which was sold in 2015 by the Ford Motor Co. In addition BNF will bring Nissan and Infiniti to Manhattan spread across 100,000 square feet facing West 55th Street. Land Rover and Jaguar will split 150,000 square feet facing West 54th Street that will be completely renovated with the franchise’s new global branding. The dealerships will have separate entrances, as well as bookend the 639 Eleventh Avenue - Rendering planned new lobby for the 150,000 square feet of upper level office space that will undergo major renovations. The signing is significant in the face of the threatened presence of dealerships that made up the Far West Side area’s Auto Row due to increased development activity and increasing rents.

Adidas / 565 Fifth Avenue (Grand Central) – The athletic footwear and apparel retail chain will be debuting a new flagship store in the fall, having secured a 34,000-square-foot lease in a 15-year deal. The space will reportedly be the brand’s largest North American flagship; and span the ground, 2nd and lower levels of the office tower, fetching an asking rent for the ground level space of $1,000 per square foot according to sources. A portion of the space had been occupied by Build-a-Bear Workshop which closed the 22,000-square-foot outpost in June. The remaining space is occupied by beauty product retailer Redkin which will be relocating to 404 Fifth Avenue.

Source:

http://www.businessoffashion.com/articles/news-analysis/google-hunts-space-new-yorks-soho-first-retail-store

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Leasing Activity (cont’d) Lease Deal Highlights (cont’d) Museum of Modern Art Design Store / 81 Spring Street (SoHo) – The retail outpost of MoMA will be remaining in their corner home at Crosby Street as a result of a renewal deal successfully struck between the museum and landlord. The 3-level space had been introduced to the market in the spring as a result of MoMa considering financial feasibility of the location. They have occupied the store since 2001 at a reported blended asking rent at the time of $125 per square foot, under a lease that is due to expire in July 2016. The 14,500-square-foot store had an asking rent of $2.5 million per year ($250 per square foot blended based upon 10,100 square feet of selling space), comprised of 4,500 square feet of ground level space at $450 per square foot; 5,600-square-foot basement space that can be used as selling space at $90 per square foot; and 4,400 square feet of sub-basement storage space. Ethan Allen / 915 Broadway (Flatiron) – The Connecticut-based home furnishings retailer will be opening their 2nd Manhattan location, recently signing an 11-year lease for a 12,790-square-foot outpost at the corner of East 21st Street. The multi-level space is comprised of 7,831 square feet of ground level space featuring 19-foot ceilings, 3,795 square feet of mezzanine space, and 1,164 square feet on the lower level. The gallery-style store that boasts roughly 150-feet of wraparound frontage is expected to open in the spring. Asking rent for the space was reportedly $2.3 million per year, equating to a blended $198 per square foot between the ground and mezzanine levels. Ethan Allen’s current store is located at 1010 Third Avenue on the Upper East Side.

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Leasing Activity (cont’d) Lease Deal Highlights (cont’d) Equinox / 315 Park Avenue South (Flatiron) – The fitness chain will be opening a 44,458-square-foot facility in the Midtown South neighborhood, having signed a 20-year lease that was announced in mid-January. The new outpost features high ceilings and includes a private entrance on East 24th Street. The space is currently occupied by Credit Suisse Group AG which is downsizing; and spreads across the entire 2nd and 3rd floors plus a portion of the 4th floor. Asking rent for the deal was reportedly $80 per square foot; and brings the number of New York City locations for the subsidiary of Related Companies to a total of 28. Hennes & Mauritz (H&M) / 4 World Trade Center (World Trade Center) – The fast-fashion Swedish retailer will be making its debut in Lower Manhattan, reportedly announcing in December that they will be opening a 2-level store in 25,000 square feet at the tower this spring. The new store will be situated below the popular Italian food market Eataly which will also open this year on the tower’s 3rd floor. Retail leasing activity at the World Trade Center has been robust; and although the complex’ retail operator Westfield Properties has kept most of the ongoing signings under wraps, it has been reported that an undisclosed grocer will be adding its name to the list of retailers at 4 World Trade Center as a result of a 25,000-square-foot lease in a below-grade space.

H&M, 4 World Trade Center - Rendering

Target / 255 Greenwich Street (World Trade Center) – The lower-priced retailer will be opening its 2nd New York City outpost in Lower Manhattan next fall as a result of the lease for 48,242 square feet announced in November. The new store with its entrance on Murray Street will be spread across 7,358 square feet of ground level space at an asking price of $200-$250 per square foot; and 40,894 square feet of selling space on the lower level that boasts 20-foot ceilings. The big-box retailer made its debut in Manhattan in 2010 with the opening of a store in Harlem’s East River Plaza at 517 East 117th Street. The original 52,252-square-foot space had been leased by food market Fairway in 2013 with an expected opening in 2015. The space which was slightly larger with 11,358 square feet of ground level space was ultimately put back on the market after the grocer incurred financial setbacks and the landlord canceled the lease. Giorgio Armani / 752-760 Madison Avenue (Upper East Side) – The Italian fashion brand will remain at the 16,000-square-foot flagship location despite a $10 million per year increase on top of the $3.5 million currently being paid. Negotiations had reportedly led to legal action over a potential redevelopment of the existing 4-story building that would have pushed Armani out. Ultimately both parties were able to come to terms that will see the luxury retailer extend their stay through 2024.

Source:

http://tribecatrib.com/content/lower-manhattans-first-hm-store-open-world-trade-center-1 • http://tribecatrib.com/content/supermarket-world-trade-center

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Sale Activity New to Market 50 Bond Street (NoHo) – Thor Equities has introduced the 6,400-square-foot, 2-story retail condominium to the market, sources expecting that a sale will fetch $17 million ($2,656 per square foot). The unit is entirely leased by high-end activewear brand Lululemon as a result of the 10-year lease deal announced in September. The space which had an asking rent of $250 per square foot offered 3,400- and 3,000 square feet of ground and lower level space. Thor had acquired the retail unit situated at the base of a 6-unit residential condominium between Lafayette Street and Bowery for roughly $11.166 million ($1,745 per square foot) in April 2015. 19 East 71st Street (Upper East Side) – Longtime owner the Rubin family have introduced the 5-story, 10,145-square-foot townhouse to the market, hoping that the roughly 6,150 square feet of retail at its base will drive the property’s value. Located between Park- and Madison Avenues, the sale which is currently being offered at an asking price of $26.5 million ($2,612 per square foot) includes 16,000 square feet of additional air rights for potential development. Fashion designer Monique Lhuillier leased the 2-story retail space as her first U.S. flagship location in 2012. Other recent activity in the prime Upper East Side retail corridor that boasts several upscale stores has included Acadia Realty Trust’s acquisition of 2-townhouses last year, paying $19.25 million ($2,058 per square foot) for the roughly 9,350-square-foot property at 27 East 61st Street which has about 7,238 square feet of retail space; and $28 million ($3,492 per square foot) for 17 East 71st Street, an 8,018-square-foot commercial townhouse.

Sales to Watch for 475 Sixth Avenue (West Village) – TF Cornerstone is reportedly in contract to purchase the 46-year ground lease of the 13,037-squarefoot retail co-op unit for $31 million ($2,378 per square foot) from Madison Capital. Situated at the base of an 82-unit residential building, the unit is currently home to CVS, Wells Fargo, and a parking garage. The acquisition that was expected to close before the end of 2015 is reportedly part of a 1031 exchange, TF Cornerstone having recently sold the leasehold of the office property at 645 Madison Avenue (Plaza) for $76 million. 135 East 125th Street / 2080-2082 Lexington Avenue (Harlem) – Thor Equities is reportedly in contract to purchase the adjacent buildings with a combined total of 103,000 square feet for $75.5 million ($733 per square foot) from DDM Development & Services, who developed both properties in 2011. The properties dubbed Gateway I and II span an entire block-front between East 125th- and 126th Streets along Lexington Avenue. •

135 East 125th Street – The 3-story, 44,000-square-foot building is home to Raymour & Flanagan and Duane Reade.

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2080-2082 Lexington Avenue – The 6-story, 59,000-square-foot building is occupied by an IHOP in the base with offices for community service organizations on the upper levels.

Source:

http://ny.racked.com/2012/10/15/7707601/monique-lhuilliers-first-store-opens-on-east-71st-street

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Sale Activity (cont’d) Sale Highlights 15-Building Retail Package – The JLL Income Property Trust, a non-listed REIT that is a subsidiary of the Chicago-based brokerage firm has acquired a 13.7% stake for $165 million, including assumption of an existing debt, in the retail portfolio from Madison International Realty’s 49% share as co-owner with Forest City Enterprises. The deal that values the roughly 98.5% leased, 2.7 million-square-foot package spread across the 5-boroughs and New Jersey at reportedly $1.3 billion, of which Forest City will retain its 51% controlling interest. Larger properties include the Atlantic Terminal and Atlantic Center Malls in Brooklyn’s Fort Greene neighborhood with a combined total of 770,000 square feet; and the 311,000-square-foot retail component at the base of the 460-key Hilton Times Square at 234 West 42nd Street, home to multiplex AMC Empire 25 and museum Madame Toussauds New York. 660-668 Eighth Avenue aka 223-267 West 52nd Street (Times Square) – Tishman Realty Corporation acquired the 6-story, 200,000-squarefoot commercial building dubbed the E-walk Retail for $40 million, having previously been ground leasing the property from the city for several years. The complex which was constructed in 1999 is connected to the 45-story Westin New York at Times Square that opened in 2002, also owned by Tishman. The complex is comprised of 16 commercial units spread across approximately 90,000 square, with the remainder dedicated to office use. Regal Cinemas, Dallas BBQ, BB Kings Club & Grill, Starbucks, Yankee Clubhouse, and Chevys Mexican Restaurant are among the roster of current retail tenants. 139 Spring Street (SoHo) – Invesco has reportedly acquired the ground level 4,500-square-foot retail condo for $112 million ($24,888 per square foot) through an off-market deal from loft conversion sponsor Spring & Wooster Co. The unit which includes some lower level storage space is situated at the base of a 9-unit residential condominium at the corner of Wooster Street; and has been occupied by fashion label Chanel since 2000 according to sources. Real estate taxes on the retail unit are less than $50,000 per year, the reportedly low figure due to the building being under the protection of a Tax Class 2c, which reportedly restricts assessment bumps to no more than 8% per year. Thor Equities Double Play (SoHo) – The developer has purchased (2) retail co-ops in the Midtown South neighborhood for a combined $27.2 million through separate transactions. •

169 Mercer Street – The 3,800-square-foot unit was acquired for $20 million ($5,263 per square foot); and is currently home to fashion retailer R by 45rpm who will remain in the space under its current lease.

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424 Broome Street – The 4,000-square-foot unit that was delivered vacant was acquired for $7.2 million from Ankasa NYC, previously home to the seller’s homegoods brand Ankasa.

138 Greene Street (SoHo) – Ascot Properties has acquired the 5,500-square-foot co-op unit for $38.5 million ($7,000 per square foot) from Thor Equities. Situated at the base of a 6-story residential cooperative, the deal represented an over 200% increase in value above the $15.93 million ($2,896 per square foot) that Thor paid in July 2014. Existing tenant B&B Italia’s lease will reportedly expire in August, offering potential opportunity for new ownership to reposition the space. 123-127 Lafayette Street (SoHo) – An undisclosed buyer has reportedly acquired the 6-story, 21,687-square-foot office and retail building for $33.5 million ($1,545 per square foot). The fully leased property commanded a price more than triple the roughly $10.752 million seller Stellar Management paid in 2013, as retail continues to drive property values. Although the buyer’s identity was not disclosed, it was rumored to be real estate investment firm First Atlantic Capital according to sources. Current retail tenants housed at the base of the building are Dunkin Donuts and tattoo shop Love Hate Social Club.

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Sale Activity (cont’d) 670 Columbus Avenue aka 100 West 93rd Street (Upper West Side) – New Jersey-based Klein Group acquired the retail condo and parking garage for $60.5 million from the Starrett Corp. The 2-level unit that is close to 36,000 square feet spread across the ground and lower levels is situated at the base of a 280-unit residential condominium. Currently 13,000 square feet is leased to party supply retailer Party City. The remaining 23,000 square feet which boasts 350-feet of wraparound frontage is being marketed at current asking rents of $150 per square foot for the 17,500 square feet of ground space; and $75 per square foot for the 5,500 square feet of lower level selling space. The deal also includes a 31,000-square-foot garage that is currently leased to and operated by Icon Parking Systems. 2008 Broadway (Upper West Side) – Jamestown Properties has purchased the 37-year master lease interest of the 32,400-square-foot retail condo for just over $70 million from co-owners Angelo, Gordon & Co. and Madison Capital. The unit situated at the base of the Zeckendorf-developed 28-story condominium is comprised of 22,000 square feet of ground level selling space, with the remaining 10,000 square feet basement storage space and a mezzanine utilized for mechanical equipment. Lowe’s currently occupies the space in a 10-year lease announced last year, making their Manhattan debut with the store’s opening in August. A Food Emporium that shuttered in 2013 had previously occupied the space. 712 Madison Avenue (Upper East Side) – The Midtown-based Jackson Group has acquired the 5-story, 5,500-square-foot retail/commercial building for $83 million ($15,090 per square foot) in an off-market deal from Duell Management Systems. Currently leased to jeweler David Yurman, the building is located at the corner of East 63rd Street where ground level asking rents for retail space average $1,613 per square foot according to the Real Estate Board of New York’s (REBNY) Fall 2015 retail report. 820 Madison Avenue (Upper East Side) – Status Capital has acquired the 5-story, 8,000-square-foot building for $47 million ($5,875 per square foot) from Duell Management Systems. Located between East 68th- and 69th Streets, the building is currently home to a Dolce & Gabbana children’s boutique in a lease that extends to 2025. The fashion firm is reportedly paying a below-market rent of $1.5 million per year for the property comprised of 3-floors of retail space and 2-floors of office space, having invested $12 million to rehabilitate it.

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Lending Shops & Restaurants at Hudson Yards (Hudson Yards) – Co-developers Related Companies and Oxford Properties Group closed on $1.5 billion in construction financing from co-lenders Bank of China, Deutsche Bank, Industrial and Commercial Bank of China (ICBC) and Crédit Agricole, according to Related’s press release. The 7-story retail component that began construction in June will span between the 10and 30 Hudson Yards towers; and is expected to open in 2018. Neiman Marcus will be the anchor retail tenant having leased a 250,000-square-foot flagship store last year, joined by roughly 100 businesses including a new restaurant by restaurateur and chef Thomas Keller. The new retail destination rising on the 28-acre site is expected to attract 24 million people; and generate an estimated $1 billion a year with improved subway accessibility as a result of the new 7-train subway station at 34th Street and 11th Avenue that opened last summer. 432 Park Avenue (Midtown East) – RFR Realty is looking to raise $30 million for a new high-end eatery that will replace the famed Four Seasons Restaurant which will be vacating the space in 2017. The campaign launched in December hopes to attract at least $300,000 from as many as 100 partners. The new restaurant will Shops & Restaurants at Hudson Yards - Rendering be operated by Major Food Group, which was founded by restaurateurs Mario Carbone, Jeff Zalaznick and Rich Torrisi. An investment return of 120% has reportedly been promised before ownership and Major Food Group take any proceeds, and a 40% cut of profits after that.

Source:

http://www.related.com/our-company/press/233/RELATED-COMPANIES-AND-OXFORD-PROPERTIES-GROUP-CLOSE-ON-MORE-THAN-$5-BILLION-INFINANCING-FOR-FLAGSHIP-OFFICE-TOWER-AND-RETAIL-COMPLEX-AT-HUDSON-YARDS

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New York City Retail Construction Rises to Meet Consumer Demand Reported statistics reveal that there was 4.8 million square feet of new retail either under construction or undergoing major renovation throughout the 5-boroughs during the 3rd quarter 2015, just slightly below the 4.9 million figure of the last peak in 2007. Retail projects range in size from major developments to small street-level stores; and are already changing the landscape of the city with this year’s opening of the renovated 250,000 square feet of retail space at Brookfield Place, the anticipated mid-2016 opening of Westfield World Trade Center’s 350,000-square-foot mall, and the under construction 1 million-square-foot Shops & Restaurants at Hudson Yards. On a smaller scale robust residential development is giving rise to emerging neighborhoods, with many including new ground level retail adding to the city’s number of major retail corridors. However according to an economic study released by the Brooklyn Chamber of Commerce in October, the borough is reportedly losing out to places like Long Island and New Jersey on $6 billion in consumer spending in part due to a lack of big-box stores: •

$2.6 billion missed by car dealerships and parts stores;

•

$1.3 billion by gas stations;

•

$1.1 billion in general merchandise sales; and

•

$629 million to grocery stores.

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Brookfield Place

World Trade Center Oculus - Rendering

Shops & Restaurants at Hudson Yards - Rendering

Fulton Transit Center

South Street Seaport - Rendering

Essex Crossing Retail - Rendering

Retail Construction (cont’d) Below is a snapshot of some major projects in the pipeline for each borough: Manhattan is leading the way with approximately 2.4 million square feet a new retail on the horizon, up from 1.2 million square feet in 2009. Major projects include: •

Shops & Restaurants at Hudson Yards (Hudson Yards) – 1 million square feet currently under construction on the Far West Side will be anchored by Neiman Marcus. It is anticipated that the new 7-story retail may not be sufficient for the heightened demand created by new residential and office space within the multi-building Hudson Yards project, and the rising Manhattan West located directly across the street.

•

Westfield’s World Trade Center (Lower Manhattan) – 365,000 square feet divided amongst 125-stores that are expected to reportedly generate $700 million to $1 billion in sales. An additional 90,000 square feet will come online within the yet-to-be be built 2 World Trade Center tower.

•

Fulton Transit Center (Lower Manhattan) – 65,000 square feet within the new 180,000-square-foot transit hub.

•

South Street Seaport (Lower Manhattan) – The majority of which will be 365,000 square feet of retail, dining and entertainment space spread amongst the redeveloped Pier 17 that is currently under construction.

•

Essex Crossing (Lower East Side) – 400,000 square feet within the 1.9 million-square-foot multi-building project being developed in phases. Major tenants include Regal Cinema, Splitsville Luxury Lanes, and Essex Street Market.

•

Bourdain Market (Chelsea) – 100,000 square feet at Pier 57’s dubbed “Superpier” project that will house a food stall market which is expected to open this year.

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City Point - Rendering

Revere Sugar Factory - Rendering

Empire Outlets - Rendering

Staten Island Mall Expansion - Rendering

Boulevard - Rendering

Riverside Galleria - Rendering

Retail Construction (cont’d) Brooklyn had 1.1 million square feet of planned retail construction or major renovation in the 3rd quarter 2015. Major projects include: •

City Point (Downtown Brooklyn) – 675,000 square feet of retail space within the 1.8 million-square-foot mixed-use project of which almost 80% has reportedly already been leased. Major tenants include Century21, Target, Alamo Drafthouse Cinema

•

Revere Sugar Factory, 280 Richards Street (Red Hook) – 250,000 square feet of retail space as part of the planned 1.7 million redevelopment project that will include 900 residential units and 400,000 square feet of parking spread across the 6-acre site.

Staten Island – 817,000 square feet of retail projects, the majority of which are along the borough’s North Shore. Several new real estate projects are prompting heightened interest in the borough that not too long ago was overlooked. •

Empire Outlets, 55 Richmond Terrace – 350,000 square feet of new retail outlet space of which about 50% has reportedly been leased. Major tenants include Nordstrom Rack, H&M, Banana Republic and Gap.

•

Staten Island Mall, 2655 Richmond Avenue – 427,000 square of new retail space that will expand the 42-year old, 1.2 million-squarefoot mall. Major tenants include Macy’s, Fairway Market and Dave and Busters.

•

Boulevard, 2600 Hylan Boulevard – 400,000 square feet of new retail space as a result of the planned redevelopment of the former Hylan Plaza strip mall into a modern shopping center.

•

Riverside Galleria, 4927 Arthur Kill Road – 458,798-square-foot shopping complex spread across 21.87 acres along the waterfront on the western side of Staten Island at the foot of the Outerbridge Crossing is expected to be completed in 2017; and will offer a mix of retail stores, restaurants and a 55,000-square-foot dine-in multiplex theater.

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Riverdale Crossing - Rendering

Throggs Neck Shopping Center - Rendering

Baychester Square - Rendering

Mall at Bay Plaza

Retail Construction (cont’d) Bronx – 433,000 square feet of new retail space as demand rises with a surge of residential development in the city’s northernmost borough. •

Riverdale Crossing, 184 West 237th Street – The 159,037-square-foot retail complex that opened in 2014 is approximately 98% leased. The 2-building outdoor mall replaced the former home of Stella D’Oro Biscuit Company’s factory. Major tenants include anchor tenant BJ’s Wholesale Club and Petco.

•

Baychester Square – 350,000 square feet of planned retail complex on the approximately 12-acre site that will seek LEED certification with a tentative delivery in that 2nd-half of 2017.

•

Throggs Neck Shopping Center, 815 Hutchinson River Parkway – 300,000 square feet of retail space at the site of a former post office, helping to transform the former industrial area into a new retail destination. The 2-level shopping center opened in 2014. Home goods retailer Target anchors the complex in a 165,000-square-foot condominium interest.

•

Mall at Bay Plaza, 200 Baychester Avenue – A 780,000-square-foot expansion of the Bay Plaza Shopping Center was completed in 2014. The project delivered a suburban-style indoor mall that is anchored by Macy’s in a 3-level, 160,000-square-foot store.

•

558 Grand Concourse – 175,000 square feet for a possible retail marketplace and rooftop restaurant or beer garden at the site of the former Bronx General Post Office.

Source:

http://wtc.westfield.com/press/ • http://www.6sqft.com/revealed-massive-mixed-use-development-at-red-hooks-revere-sugar-factory-site/ http://www.empireoutletsnyc.com/ • http://www.silive.com/westshore/index.ssf/2015/03/12_million_staten_island_mal_e.html http://riversidegalleria.com/the-site/# • http://www.gridproperties.com/projects-ghs.html • http://www.flushingcommonsupdates.com/about-the-project/ http://queens.brownstoner.com/tag/blumenfeld-development-group/ • http://queens.brownstoner.com/tag/30-30-northern-boulevard/ http://www.nydailynews.com/new-york/queens/long-island-city-developer-build-7-story-commercial-complex-30-30-northern-blvd-article-1.1068205

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Flushing Commons - Rendering

Crossing at Jamaica Station - Rendering

Merrick Boulevard - Conceptual Rendering

30-30 Northern Boulevard - Rendering

Retail Construction (cont’d) Queens – 334,000 square feet of retail space under construction or major renovation, representing less than ¼ of the 1.7 million-squarefoot peak in 2007. •

Flushing Commons – 230,000 square feet of new retail as part of the 1.8 million-square-foot mixed-use development that will rise on the 5.5-acre former municipal public parking garage and open space site. Construction of the LEED-certified “micro-nabe” project that is being built in 2-phases is already underway with Phase 1 tentatively expected to be completed in early 2017; and Phase 2 by 2021.

•

Jamaica Retail Complex – 150,000 square feet of new retail space as a result of the combined redevelopment of 3-adjacent properties in disrepair — 161-02 Jamaica Avenue, 160-16 Jamaica Avenue, and 160-08 Jamaica Avenue. Burlington Coat Factory has already committed to nearly 50% of the space. The project will help revitalize the commuter hub that in the past was a thriving retail district.

•

Crossing at Jamaica Station, 147-22- and 147-30 Archer Avenue – 100,000 square feet of new retail space will be constructed at the base of a pair of planned residential buildings to be located across the street from the Long Island Railroad. Ground breaking is expected before the end of the year.

•

Merrick Boulevard, Jamaica – 160,000 square feet of retail space as part of a proposed mixed-use development that will rise on a group of parking lots near 168th Street and 90th Avenue.

•

30-30 Northern Boulevard, Long Island City – 137,000 square feet of retail space at the base of a planned retail and office complex that will result in the redevelopment and vertical expansion of the longtime vacant manufacturing building. Construction of the project seeking Gold LEED certification is pending an anchor tenant being secured.

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Development Activity Projects on the Horizon 261-263 West 34th Street (Penn Plaza/Garment) – The partnership of the Manhattan-based Chetrit Group and Brooklyn-based Cornell Realty Management are one step closer to creating an assemblage of parcels between 7th- and 8th Avenues for future redevelopment. As a result of a property swap, the duo will be acquiring the 3-story retail building for an undisclosed price from Brooklyn-based investor Charles D. Cohen. In exchange, Cohen purchased the pair of single-story retail buildings at 245-247 West 34th Street for $22.6 million. Chetrit and Cornell had acquired the 2-parcels one-year prior for a combined total of $31.486 million, reportedly filing plans in 2014 to construct a 17-story, 45,000-square-foot hotel/retail development that will now be revised. Over the last few years, the duo has acquired several commercial properties along the strip: •

251- and 253 West 34th Street, a 3- and 4-story building for $41 million in 2014;

•

255 West 34th Street, a 6-story building for $20 million in 2014;

•

259 West 34th Street, a 4-story building that is currently home to fast-food eatery Wendy’s for $20.5 million in 2015.

Although unverified, the remaining 2-parcels that would appear to complete the partners’ assemblage are long-term owned 249- and 257 West 34th Street. Project details have yet to be released, but both parties are reportedly planning to construct retail developments on their respective sites. However updated reports announced the recent decision to dissolve the partnership and split the parcels between both parties, resulting in each developer reportedly taking 80-feet of frontage between 7th- and 8th Avenues. Moving ahead with revised plans Cornell Realty intends to construct a 4-story, 35,000-square-foot retail project, having secured a $48.5 bridge loan from lender Madison Realty Capital to buy out Chetrit and take control of the properties on the west side of the block comprised of 4-properties under the address 257-263 West 34th Street. A total of $42.5 million in new debt was provided to Cornell at closing, plus an agreed upon additional $6 million in future funding. Development plans by the Chetrit Group of the remaining 4-properties comprised of 249-255 West 34th Street have yet to be announced, although it was noted that a retail or hotel project would be a natural move. P.32 P.32 P.3 3322

11-13 Bond Street - Rendering

159 Ludlow Street - Rendering

7-11 Ludlow Street - Rendering

Development Activity (cont’d) Project Plans in Progress 719 Seventh Avenue (Times Square) – SL Green is developing the 3-story retail building located on the corner of West 48th Street at the northern edge of the district. Despite the project’s smaller scope, it will assert its presence in the neighborhood with a 150-foot-tall, 5,000-square-foot array of digital LED billboards. Demolition of the existing 3-story structure has already been completed, and excavation for the new building underway that will reportedly deliver approximately 6,024 square feet plus a 2,008-square-foot cellar. SL Green acquired the 2,000-square-foot site that could accommodate up to 28,114 square feet and LED signage for $41 million ($6,806 per buildable-square-foot based upon current plans for above ground interior space) in 2014. The planned LED signage is expected to generate significant income despite the new structure’s smaller size. Starrett-Lehigh Building, 601 West 26th Street (Chelsea) – RXR Realty is planning a major investment project that will create approximately 50,000 square feet of retail space at the base of the 20-story tower. The move will reportedly bring a welcomed addition to the neighborhood that has become underserved due to a growing density of office workers. Some efforts by RXR to partially address the 719 Seventh Avenue - Rendering lack of food options for the building’s tenants included the welcoming of food trucks to park on landing areas on each floor in front of the elevators, made possible by the building’s industrial-sized service elevators. More recently a deal struck with existing tenant Verizon to relocate its dispatch service center to the other side of the building on 12th Avenue opened the door to allow for the repositioning of the space that will span a full block along 11th Avenue between West 26th- and 27th Streets. Work on the new retail build-out is expected to begin in 2017. 560 Broadway (SoHo) – The Gural family are planning to reconfigure the 6-story office/retail building to further capitalize on the building’s retail component. The estimated $10 million project will result in the office component’s entrance being relocated to the rear of the building on Crosby Street, utilizing the building’s service entrance to create a new front door and lobby. As a result, existing tenant Converse will be able to expand its roughly 8,000-square-foot flagship store by about 1,500 square feet; and increase frontage along high-trafficked Broadway to about 30-feet. Converse shares the retail space at the base of the building with upscale grocer Dean & DeLuca. The project will also result in a win for the office tenants who were in favor of gaining a quieter side-street entrance. 11-13 Bond Street aka 348-354 Lafayette Street (NoHo) – RFR Realty filed applications in December for the conversion and expansion of the existing 4.5-story, 16,410-square-foot commercial building. Formerly home to a women’s shelter operated by the Center of Urban Community Services, the project would result in the conversion to a big-block, single-tenant retail use. In addition, the 4th floor will undergo a “horizontal enlargement.” Landmark Preservation Commission approvals will likely be required for the estimated $3 million project located within the Noho Historic District. RFR acquired the corner property for $26 million last summer ($1,584 per square foot). 159 Ludlow Street (Lower East Side) – Co-developers Hesky Haim and Continental Worsteds plan to develop a 2-story, 2,126-square-foot retail building on the longtime vacant lot which last traded in 2007 for $1.515 million ($713 per buildable-square-foot). The project’s design reveals a linear height of 96-feet, creating incredible ceiling heights for the building that is intended to serve as event space. Plans were filed in September for the proposed glass-façade structure, but appear to have been disapproved by the city’s Department of Buildings (DOB). 7-11 Ludlow Street (Lower East Side) – Property owner Alexander Olch is converting the existing single-story, 5,507-square-foot warehouse into a 2-story, movie theater. The property is located just north of Canal Street, in close proximity to the multi-building Essex Crossing project. As part of the project dubbed Metrograph, the structure will undergo a vertical expansion delivering an 8,853-square-foot building that in addition to a 2-screen theater will host a café, lounge and restaurant. Construction and renovations are slated for a mid-February completion. P.33 P.33 P.3 33 33

Shrinkage & Expansions Online Flash-Sale Retailers Lose Luster as Economy Recovers E-commerce start-ups that launched during the height of the recession offering deep discounts for fashion and furniture via limited-time flash sales have incurred significant set-backs as the economy recovers. Off-price chains such as T.J.Maxx, Nordstom Rack, and Saks OFF 5TH which reportedly had a 2.8% increase in sales during the 3rd quarter, are now offering similar deals to consumers. Recently it was announced that retail trade corporation Hudson’s Bay Co., owner of the Saks Fifth Avenue and Lord & Taylor chains, will be acquiring Gilt Groupe Inc, a pioneer of the online flash-sale concept that was launched in 2007 during the recession. The deal for $250 million in cash was slated to close early February, and represents a significantly lower price than the $1.1 billion figure the private company was valued by venture capitalists in 2011 according to some sources. Hudson’s Bay reportedly plans to pair Gilt with its Saks OFF 5TH brand, opening Gilt concept shops inside the off-price brand stores in an effort to create an “all-channel” model. Other flash-sale start-ups incurring similar declining sales include: •

Zulily which sold to Liberty Interactive Corp’s QVC last summer for $2.4 billion, reportedly representing a fraction of its post-IPO price.

•

Ideeli.com was acquired by Groupon in 2014 for $43 million in cash which reportedly resulted in a loss for Ideeli shareholders.

•

Fab.com was acquired by electronics contract manufacturer PCH International in 2015 for an estimated $15-$25 million. The company launched in 2001 had been valued at approximately $1 billion about 1-year prior.

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Shrinkage & Expansions (cont’d) Looming Closures Teavana Tea Bars Slated to Shutter The tea café founded in 1997 was primarily a mall-based retailer with its products also sold at Starbucks locations. The company was acquired by Starbucks in 2012 for an aggregate price of $620 million in cash, subsequently launching the tea-bar concept in Manhattan in 2013. Currently there are (3) locations, and Starbucks will be converting them into Starbucks locations reportedly commencing this spring: •

1142 Madison Avenue aka 30 East 85th Street – The 1,700-square-foot store opened in 2013;

•

1073-1077 Third Avenue – The 1,954-square-foot store is located in the Upper East Side near East 63rd Street opened in 2014;

•

771 Broadway aka 63-67 9th Street – The 3,000-square-foot store located near East 9th Street in the East Village opened in 2014.

The remaining (2) Teavana stores at 1291 Lexington Avenue near East 86th Street; and 2261 Broadway at West 81st Street will be unaffected according to reports. On a national level some other locations amongst the brand’s specialty retail portfolio of over 350 stores will close, Starbucks hoping to elevate the Teavana tea experience through its Starbucks stores which has already proven successful. Sale activity of Teavana-branded handcrafted tea beverages offered at Starbucks outposts reportedly generated $1 billion in sales during the past fiscal year, representing a 12% increase year-over-year. Some industry sources account the lack-luster business for tea products that make it financially unfeasible for standalone stores to succeed simply due to the fact that most Americans prefer coffee to tea; further pointing out in example that the Argo Tea Café at 75 University Place recently downsized its 2,000-square-foot store on the corner of East 11th Street by about 50%.

Looking to Expand Walgreens Nears Deal to Buy Rite Aid Deerfield, IL-based Walgreens Boots Alliance announced an agreement to acquire the retail pharmacy chain Rite Aid based in Camphill, PA for approximately $17.2 billion, including acquired net debt. To win regulatory approval from the Federal Trade Commission (FTC), Walgreen’s agreed that up to 1,000 of Rite Aid’s roughly 4,600 drug stores throughout 31-states and the District of Columbia — of which nearly 200 are located throughout New York City, could be sold where the company’s presence would amount to a monopoly. In addition to the retail outposts Rite Aid has reportedly over 7 million square feet of distribution space through a mix of ownership and leases, plus another 700,000 square feet of office and warehouse space near the company’s headquarters. Rite Aid is currently building a 900,000-square-foot distribution center in Spartanburg, SC, that upon completion planned to consolidate existing centers located in Charlotte, NC, Tuscaloosa, AL, and Poca, WV. The potential closure of a large number of either Rite Aid or Walgreen’s stores has given rise to some concerns within the real estate industry, creating a possible ripple effect that could: •

Prompt other retail tenants within a retail center with co-tenancy clauses to opt out of their lease should the anchor drug store in the center close;

•

Create the risk of loans secured by owners that used their shopping center as collateral being put into default, or causing a “trigger period1” in the loan due to a major tenancy clause or by lowering debt service coverage ratios below the level the loan allows.

The company founded in 1901 currently has over 13,200 stores in 11 countries; and operates under 3-brands — Boots in the United Kingdom and elsewhere; and in the U.S. under Walgreens and Duane Reade, which was acquired in 2010 in a cash transaction totaling $1.1 billion for the New York City drugstore chain’s 257-stores, its corporate office, and 2-distribution centers. If the merger is approved, the transaction is expected to close before the end of 2016, leaving Walgreens and CVS Pharmacy as the 2-dominant drugstore chains in the U.S.

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Shrinkage & Expansions (cont’d) Looking to Expand (cont’d) Mattress Firm Acquires Rival Mattress Retail Chain The Houston, TX-based retail chain announced in November that the company had entered into an agreement to acquire competitor Sleepy’s for an aggregate purchase price of $780 million. The acquisition of the nation’s 2nd-largest mattress retailer is expected to close in 2016 with Mattress Firm assuming approximately $30 million in certain quantified liabilities as part of the deal. Operations are expected to continue under both brands in the near term, with an East Coast office maintained on Long Island. As the nation’s largest mattress retailer with 2,420 locations, Mattress Firm has nominal presence in New York; but the acquisition of Hicksville, Long Island-based Sleepy’s 1,050 stores spread across 17-states will fill the company’s last major geographical gap. It is anticipated that with very little geographic overlap, the acquisition should not raise antitrust concerns according to sources. Sleepy’s was founded in 1931 upon the Acker family opening the first mattress store in Brooklyn, ultimately expanding with several acquisitions of competitors including Klein Sleep, Rockaway Bedding and Dial-A-Mattress.

1

Rating Trigger – a provision in a loan agreement that initiates a specific action in the event of a change in a firm’s credit rating

Source:

http://money.cnn.com/2010/02/17/news/companies/Walgreens_Duane_Reade/ http://www.wsj.com/articles/walgreens-boots-alliance-nears-deal-to-buy-rite-aid-1445964090 http://www.walgreensbootsalliance.com/newsroom/news/walgreens-boots-alliance-to-acquire-rite-aid-for-172-billion-in-all-cash-transaction.htm http://www.usatoday.com/story/money/business/2015/11/02/walgreens-rite-aid-sell-stores/75067210/

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Notable Retail Transactions Lease Address

Submarket

District

Sq. Ftge

255 Greenwich Street

Downtown

World Trade Center

48,242

Target

250 Vesey Street Brookfield Place

Downtown

World Trade Center

16,750

Saks 5th Avenue - Men’s Store

70 Pine Street

Downtown

FiDi

13,000

Urban Market

315 Park Avenue South

Midtown South

Flatiron

44,458

Equinox

860 Washington Street

Midtown South

Chelsea

25,000

Starbucks

81 Spring Street

Midtown South

SoHo

14,500

MoMA Design Store (renewal)

915 Broadway

Midtown South

Flatiron

787 Eleventh Avenue

Midtown

Hell’s Kitchen

135 East 57th Street

Midtown

Plaza

56,000

Saks OFF 5TH

565 Fifth Avenue

Midtown

Grand Central

34,000

Adidas

693-703 Fifth Avenue St. Regis Hotel

Midtown

Plaza

14,700

Swatch

835 Third Avenue

Midtown

Plaza

14,000

Panda Express

Address

Submarket

District

139 Spring Street

Midtown South

169 Mercer Street

Midtown South

12,790 265,000

Tenant

Ethan Allen BNF Automotive (expansion)

Sales Sq. Ftge

Sold Price

SoHo

4,500

$112,000,000

SoHo

3,800

$20,000,000

Purchaser Invesco (condo) Thor Equities (condo)

424 Broome Street

Midtown South

SoHo

4,000

$7,200,000

138 Greene Street

Midtown South

SoHo

5,500

$38,500,000

Ascot Properties (co-op)

Thor Equities (condo)

123-127 Lafayette Street

Midtown South

SoHo

21,687

$33,500,000

Undisclosed

660-668 Eighth Avenue E-walk Retail

Midtown

Times Square

200,000

$40,000,000

Tishman Realty Corp.

2008 Broadway

Uptown

Upper East Side

32,400

*$70,000,000

712 Madison Avenue

Uptown

Upper East Side

5,500

$83,000,000

Jackson Group (retail building)

820 Madison Avenue

Uptown

Upper East Side

8,000

$47,000,000

Status Capital (retail building)

Jamestown Properties (master lse)

*Estimated price

The Mid-Quarter Retail Report is produced by: Jamie Mason | Director of Marketing & Research ABS Partners Real Estate, LLC

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For More Information Please Contact: 212.400.6060

•

www.absre.com

200 Park Avenue South, 10th Floor, New York, NY 10003

We Build Partnerships That Last Although the information furnished is from sources deemed reliable such information has not been verified and no express representation is made nor is any implied as to the accuracy thereof. Sources: CoStar Group, The Real Deal, Crain’s New York Business, The New York Times, New York Post, New York Yimby, and Commercial Observer