Available space bulges on Soho’s Broadway

The east and west sides of Broadway in Soho house about 120 storefronts. Some have premier tenants like Prada, Hugo Boss and Uniqlo, but last month about two dozen had space available for lease.

That’s more than 20 percent of the units, a level that is giving tenant brokers negotiating leverage. It marks a change from a few years back, when landlords held all the cards. And there’s been no major deal announced on the stretch since last fall.

Using data from leasing site Agorafy and industry sources, The Real Deal counted 27 available spaces along six blocks, including six asking $1,000 per square foot or more on the ground floor.

Those include a portion of Jeff Sutton’s 530 Broadway, which would be vacated by the current tenant, Eastern Mountain Sports; 503 Broadway, a large space being marketed by Cushman & Wakefield; and 577 Broadway, a smaller space from Cushman.

Brokers are talking about how much space is available and how expensive it is, said Ross Kaplan, senior managing director at Newmark Grubb Knight Frank.

Tenants are starting to pull back, said Robin Abrams, an executive vice president at Lansco. It is “likely rents will come down a bit, based on the competition for landlords to lock in good tenants at top rents.”

Alexander Hill, managing partner at retail brokerage Murro Hill, said most tenants “cannot justify these rents with their sales.”

“The few tenants paying record-breaking rents are one-of-a-kind and planting their corporate flags internationally with strong marketing budgets.”

Asking prices surged in 2013, after Prada resigned its ground-floor lease at 575 Broadway, at the corner of Prince Street, with landlord Peter Brant, paying a record $1,025 per square foot.

The average asking rent for the overall Soho market in the 2015 first quarter was $519 per foot, up just $2 per foot from the fourth quarter of 2014, Cushman figures showed. But it’s up 65 percent since 2012’s fourth quarter, before the Prada deal, when Soho asking rents averaged $314 per foot.

Cushman had Soho’s overall availability rate at 16.4 percent.

“Space is available on Broadway, but a large amount of it can be attributed to a fishing expedition by tenants hoping to sublease for huge profits, or landlords looking to boost their cash flows with the rocket fuel of a huge rent from a new tenant,” said Jared Epstein, a vice president at Aurora Capital Associates, which holds stakes in seven Broadway properties, including 529, 543 and 568 Broadway. 

One tenant representative broker, who asked not to be identified so as not to jeopardize relationships, said “the new message is: Don’t let the high rents scare you. We are in a deal-making mood.”

Landlords remain optimistic.

Madison Capital is set to pay about $400 million for roughly 30,000 square feet of retail space from publisher Scholastic, for 549-555 and 557-559 Broadway. Sources expect a ground floor ask of about $1,000 per foot. The company declined to comment.

Aurora’s Epstein said activity is rising at 543 Broadway, where they are asking $700 per square foot for the ground floor.

“For about a year our retail condo at 543 Broadway was available for sublease and there was no action,” Epstein said. “Recently the amount of interest from tenants for a direct deal has been overwhelming.”