The Real Deal New York

Eighth Avenue retail: More than porn meets the eye

October 29, 2007
By Matthew Strozier

At first glance, it doesn’t look like much has changed on the west side of Eighth Avenue near 44th Street. The stores there could be straight out of the gritty, crime-ridden 1970s Times Square: Stilettos, Peepworld and Play Pen. But this is only a temporary reality. A 256-unit, higher-end apartment building by developer Steve Witkoff is proposed for the site, and those retailers are more likely to be banks and drug stores in the future than porn shops.

In an ironic twist, porn shops on Eighth Avenue near Times Square may be a sign that the retail strip is actually getting better. At one time, porn shops moved to Times Square because it made business sense. Now, brokers say triple-X DVD stores are among the only operators taking spaces that may be demolished or gutted in a few years for luxury development. “Substantial retailers will not sign a lease with a demo clause,” said Aaron Gavios, executive vice president with commercial firm Square Foot Realty.

In other spots, retail rents are rising faster than the avenue is changing, Gavios said, making it hard for independent operators but encouraging low-end but high-revenue businesses. “Rent is so high that, by being high, it is actually cheapening the type of retail that is there,” he said. “It is having the reverse effect.”

But Eighth Avenue may finally be starting to shed its sketchy past and enter the new world of Times Square. “I think it is getting better,” Gavios said. “The seedy character is changing and there are less porn stores.”

Eighth Avenue has historically been a place caught in the middle.

“Eighth Avenue has always been the quiet little child next to a loudmouth big brother on the east, and a precocious little brother to the west, which is Ninth Avenue,” said Tim Tompkins, president of the Times Square Alliance.

Now Eighth Avenue is stepping out with major residential and office construction, and brokers also say the retail is not far behind.

Retail rents are $200 to $300 a square foot, and two huge new office buildings are planned directly across the street from the Port Authority Bus Terminal. The New York Times headquarters is expected to be completed in the summer with 24,000 square feet of retail on the ground floor. Next door, the former Milstein site is now being developed as a 40-story office tower by SJP Properties of New Jersey. To the north, at Eighth Avenue and 57th Street, the new architecturally ambitious headquarters building of the Hearst Corporation was recently completed.

Developer Forest City Ratner is looking to get food service in the Times building, either sit-down or to-go, that will be “refreshingly upscale” in light of what’s nearby now, said MaryAnne Gilmartin, executive vice president and director of commercial and residential development for Forest City. Retail space is renting for $100 a square foot on the side streets to $125 a square foot on the avenue, well under the Times Square rates. But Gilmartin said the goal is to land the right tenant for the building that is prepared to invest in the site.

The Times Square Alliance is making a big effort to promote retail along Eighth Avenue. The alliance says there is $253 million in lost sales potential in Times Square because office workers and residents are heading to retail locations outside the area.

The alliance is working with owners and brokers to market the strip and improve the streetscape. Examples could include encouraging the typical T-shirt shop with 150-watt florescent light bulbs to have a more attractive façde.

Eighth Avenue does not have the pedestrian traffic of the “bowtie” intersection of streets in the middle of Times Square, but it gets plenty of visitors. Figures from the Times Square Alliance say that on a Wednesday night in July this summer, Eighth Avenue near 46th Street had 21,083 pedestrians. The same location on Broadway had 56,384 pedestrians.

Overall, Times Square has seen a huge increase in pedestrian traffic since the early 1980s. One block on Seventh Avenue near 42nd Street is projected to see a 367 percent increase in foot traffic by 2020. The city is taking steps to handle the pedestrian traffic. Under a new traffic plan announced last month, all traffic coming down Seventh Avenue will be diverted to Broadway, eliminating two lanes of traffic, and allowing for more space for pedestrians in the form of expanded center islands and sidewalks.

Although it won’t be porn-shop row anymore, brokers and others say the future retail look of Eighth Avenue is still evolving. Joshua Strauss, managing director at Robert K. Futterman & Associates, said The Gap and Victoria’s Secret are unlikely to plant roots, but he sees plenty of regional and other national retailers interested. FedEx and Kinko’s, which RKF represents, want to open on Eighth Avenue, he said. “It doesn’t take a visionary to see that the development is happening,” he said.

The Times Square Alliance says that 5,000 new or soon-to-be completed apartments have gone up in Times Square since 2000, primarily on West 42nd Street.

Still, “it won’t happen overnight,” Strauss said. “Even though they can see that the block is changing and changing quickly, some retailers are scared because it hasn’t happened yet. But it only takes a few pioneers and things change very quickly.”

The Port Authority Bus Terminal has long been another detriment to the block, but the Port Authority is trying to change this. It signed a French bistro, Metromarche, to open on Eighth Avenue in the former site of the Silver Bullet Saloon. The broker on the lease, Carole Greene, a director at Newmark Knight Frank, said the rent was a bit below the market, but investment in the site was significant. “So it is a rent with a percentage over a natural break-point,” she said. “It means that everyone is taking a risk here.”

Other brokers say they are having no problem leasing retail spaces on Eighth Avenue. “As soon as it becomes available, it is getting leased,” said Jeff Winick, CEO of Winick Realty Group who has worked on Eighth Avenue for 20 years. Most recently, Winick just leased a retail space on Eighth Avenue between 42nd and 43rd streets, although he said it was too early to provide details.

Many of the smaller restaurants are moving to Ninth Avenue for the more affordable rents, giving it the neighborhood feel instead of Eighth, said Gavios. “It’s much more of a gamble and it’s a gamble that some of the local proprietors are not going to take,” he said.

Tompkins said he sees stores like American Apparel, Brooklyn Industries, Kiehl’s and bookstores on Eighth Avenue.

“There is no doubt that there is a neighborhood retail that is needed,” he said. “But it also has the potential to be destination retail for folks who can’t afford the full freight of a flagship store in the heart of the bowtie.”

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