The Real Deal New York

NYC retail pros offer predictions for 2012

Brokers hold differing expectations for Meatpacking District

December 30, 2011 01:46PM

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Top, from left: Bradley Mendelson, executive vice president at Cushman & Wakefield, Faith Hope Consolo, chairman of the Retail Group, Prudential Douglas Elliman, and Laura Pomerantz, principal at PBS Real Estate. Middle, from left: Gene Spiegelman, executive vice president, Cushman & Wakefield, Joel Isaacs, president, Isaacs and Company, and Karen Bellantoni executive vice president, Robert K. Futterman & Associates. Bottom, from left: Kim Mogull, president and CEO, Mogull Realty, Stuart Siegel, executive managing director, Grubb & Ellis New York, and Glenn Brill, managing director at FTI Consulting.
Compiled by Adam Pincus

This year retail pricing improved broadly, including reaching a record $3,000 per foot asking rent on Upper Fifth Avenue. At the same time, landlords and their agents ramped up leasing at large mall-like sites in Lower Manhattan. Yet weak areas such as stretches of the Upper East Side were a drag on the market. As the year comes to a close, The Real Deal asked some of Manhattan’s leading retail leasing brokers what they expect for 2012. Here’s what they had to say:

Bradley Mendelson, executive vice president, Cushman & Wakefield

Where do you expect to see the most growth in rents?

Times Square [rents] have hit an all time high with smaller spaces approaching — or surpassing — $2,000 per square foot. Due to the increased value of ground-floor space we would expect to see more large users reducing the size of their ground floors and being more creative in their use of space, similar to Uniqlo’s flagship [at 666 Fifth Avenue.

Where do you expect to see the biggest surprises?

I'm not surprised by any of the areas [that] have attracted most of the retail transactions
with the exception of Meatpacking… I don’t see [that] anyone is doing strong retail
business during the weekdays, except Apple, and a retailer can’t exist, successfully, on
weekend traffic alone, at any rent… I would love to be wrong.

Faith Hope Consolo, chairman of the retail group at Prudential Douglas Elliman

Where do you expect to see the most growth in rents?

The Financial District and Meatpacking/High Line will rise the most. The World
Financial Center and World Trade Center competition will lead to rising rents around the
neighborhood, and Meatpacking/High Line is coming into its own.

Where do you expect to see the biggest surprises?

The Financial District. I think we’ll be amazed by the shops clamoring to locate
Downtown. And keep your eye on the Lower East Side — new shops are taking a second
look.

Laura Pomerantz, a principal at PBS Real Estate

Where do you expect to see the most growth in rents, and where will they stay flat?

Broadway in Soho will stay flat between Houston and Broome streets as the vacancy
rate is practically nonexistent so growth has been pushing south and on the side streets
between West Broadway and Crosby [Street] where rents are strengthening.

How do you describe the mood of retail landlords?

Still optimistic and while they want the strongest face rents possible — and are often
pushed by their financing agreements — they are more open to concessions for sites with
higher rents, such as rent concession periods.

Gene Spiegelman, executive vice president at Cushman & Wakefield

In a few words, what do you expect for 2012?

I’m expecting 2012 to move forward with a base momentum coming out of 2011, the
year that we emerged from the drag of 2009 and 2010.

Where do you expect to see the biggest surprises?

I think the market most in transition is the Meatpacking District, which is transforming
itself. [The] tenant mix will have a more specialty retail make up, as opposed to trend-
setting designer mix which birthed the market.

Joel Isaacs, president of Isaacs and Company

Where do you expect to see the most growth in rents?

Madison Avenue will continue to grow. A great deal of absorption in 2011 and an influx
of exciting brands — Laduree, Bottega Veneta, Celine — has caused rents to rise and
return to pre-recession highs.

Where do you expect to see the biggest surprises?

I am hopeful that Meatpacking will finally surprise us though it has been a laggard in
retail leasing activity thus far.

Karen Bellantoni, executive vice president at Robert K. Futterman & Associates

Where do you expect to see the most growth in rents, and where will they stay flat?
The ones I expect to continue to grow are Soho and Flatiron, Fifth Avenue and Madison
Avenue. The ones that will continue to [lag] are the Upper East Side [not including
Madison Avenue] and the Upper West Side.

Kim Mogull, president and CEO at Mogull Realty

Over all, what do you expect for retail rents next year?

New York City retail rents will grow modestly in 2012, as sophisticated retailers
capitalize on temporary market fluctuations. Demand is strong both from domestic and
international tenants.

Stuart Siegel, executive managing director at Grubb & Ellis New York

How would you describe the mood of retailers and retail landlords?

Retailers are still cautious and seeking deals that highlight the disparity between where
they believe the market is versus most landlords’ more optimistic views. Landlords seem
to be confident in their pricing. As such, I predict we will see additional pop-up stores in
2012, which will give retailers the ability to test various markets.

Glenn Brill, managing director at FTI Consulting

Where do you expect to see the most growth in rents, and where will they stay flat?

On 86th Street [on the East Side], that is a very sound corridor. Rents are holding up
nicely and will probably go up. [On the other hand, on] Upper Broadway, there are a fair
number of empty stores. Will [a retailer like] Sephora fill in those spaces? I doubt it.

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