The Real Deal New York

The Bowery’s second act

As market improves, new crop of fashion merchants, tony eateries on the way

October 01, 2010 07:00AM
By Barbara Thau

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The next wave of restaurants and retail is headed for … the Bowery. Fashion merchants and eateries from boldface-name chefs are now eyeing the strip, where about a dozen spots have come on the market.

The area — a fabled “skid row” — had been the site of stunning gentrification over the last few years, as flophouses and homeless shelters gave way to luxury condos and hotels, upscale restaurants and shops, a hipster nightlife scene and even a Whole Foods supermarket. In fact, the metamorphosis has been so dramatic that the National Trust for Historic Preservation placed the Bowery on its list of America’s Most Endangered Places.

But the downturn had halted activity — until now. As the market has improved, tenants are in deal-making mode once again, brokers said.

The influx of fashion merchants on the Bowery — which in the pre-recession period ushered in upscale stores like Billy Reid, Patricia Field, Blue & Cream and John Varvatos (which replaced the iconic CBGB’s concert space) — is expected to resume.

“In the past six months, demand has completely picked up,” said Brian Segall, director with Robert K. Futterman & Associates.

By contrast, during the depths of the downturn, tenants felt entitled to bargain-basement rents, and landlords were holding firm on their asking prices, so deals “weren’t really getting done,” said Sacha Mobarak, vice president in the commercial division of Mark David & Company.

The firm has been fielding offers from clothing stores, including international merchants, for 334 Bowery on the site of a former tattoo parlor, for $65 to $72 per square foot.

Brokers estimate that rents in the area have fallen between 20 and 25 percent from their 2007 heights. They cite asking rents on the strip between $65 and $150 per square foot, with most hovering in the $100-to-$150 range.

alternate textWhat’s more, “We’re seeing landlords be more flexible with their concessions,” said Richard Skulnik, a broker with Ripco Real Estate.

Some are offering three to five months of free rent in older buildings that have fallen into disrepair, he noted.

CB Richard Ellis expects to place fashion tenants on the strip at 57 Bond Street, a former Washington Mutual branch, and 231 Bowery. Asking rents for each location are $90 per square foot, said Susan Kurland, an executive vice president at CBRE.

Indeed, 231 Bowery sits between Prince and Rivington streets, a block that tells the tale of two Bowerys. It’s home to the Bowery Mission, one of the area’s last homeless shelters, in a low-rise brick building that once typified the neighborhood. A few doors down, the New Museum of Contemporary Art towers above it in a slick, modernist high-rise.

The 231 Bowery space was most recently a restaurant equipment store, which, along with the strip’s lighting showrooms, “are beginning to phase out,” Kurland said — noting that change echoes Soho’s trajectory. “Everything in Soho,” she said, “used to be manufacturing.”

Although several kitchen supply and lighting stores still line the strip, marking the last remnants of the old Bowery, their ultimate ouster is inevitable, and has been merely waylaid by the downturn, brokers said.

As of late August, two lighting supply stores on the south end of the strip had “going out of business” signs in their storefront windows. These stores have been fixtures on the Bowery since the 1920s, when the area also had already cemented its identity as a destination for the destitute. During the 1930s, the Bowery boasted nearly 100 flophouses and numerous homeless shelters, although nearly all of those are gone today.

So instead of renewing those old leases, “landlords are trying to up-lease,” Mobarak said. “They’re trying to get much more for their space.”

Kurland added that those longtime tenants who own their real estate could have been holding out for the market to bounce back before opting to sell.

RKF is marketing what could be considered the largest, highest-profile retail property in the area, at the base of the new 144-unit luxury rental property at 2 Cooper Square.

The building boasts 22,000 square feet of retail, a portion of which is expected to rent to a “brand name,” upscale national fashion tenant, said Skulnik. (The Bowery begins in Chinatown and stretches to Cooper Square.)

More food venues with a tony twist are also headed for the area.

A restaurant from a well-known chef is poised to fill out the commercial space at 2 Cooper Square. If so, it would join the ranks of Daniel Boulud’s DBGB Kitchen and Bar at the base of the luxury rental property Avalon Bowery, as well as Pulino’s Bar Pizzeria from chef Keith McNally, of Pastis and Balthazar fame.

Pulino’s, which opened in March at 282 Bowery between Houston and Prince streets, has generated real estate buzz, heating up interest in 264 Bowery on the same block. That latter location is the former spot of Kos, the lounge that was co-owned by Denzel Washington and Lenny Kravitz, said Skulnik of Ripco, which is marketing the lease.

Since Pulino’s opened, “we’ve had multiple showings,” he noted.

The spot, with an asking rent of $140 per square foot, could be leased to another lounge or a restaurant, he said.

When a new retailer moves in, it will be sandwiched between two relics: Hawaiian Restaurant Equipment and Globe Slicers, a kitchen parts supply store, which has an old-fashion, hand-painted sign that reads, “Since 1947.”

A few blocks north, Downtown Auto & Tire at 348-352 Bowery, which now has a month-to-month lease, could become a restaurant or café from the Miami-based Metro 1 Hospitality Group, said RKF’s Segall, who is handling the space. But the group was denied a liquor license, Segall confirmed. “They still want the space, but no deal is done. We are showing it to all potentials,” he said.

The spot sits on a highly desirable corner across the street from the swank Bowery Hotel and on a street lined with galleries, he said.

At the northern tip of the Bowery, Ripco is leasing 351 Bowery between Third and Fourth streets, a new-construction commercial space. The space will likely be leased to a national retail tenant for about $125 a square foot.

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