Better rents, new projects and the Vornado effect bring new eateries to Midtown South

TRD New York /
Mar.March 15, 2010 06:01 PM
 

Once thought of as a transit hub for travelers moving in and out of Penn Station, a strip of Seventh Avenue is slowly gaining retailer clout. Brokers say the stretch of retail from 29th to 34th streets is improving because of shifting real estate values, large development projects on the horizon and the influence of one property owner: Vornado Realty Trust.

In the last few months, the quality of retailers in the area appears to have shifted. Fresh & Co., an upscale — primarily lunch — eatery, opened several months ago at the corner of 30th Street and Seventh Avenue. Pret A Manger, meanwhile, has plywood up on the corner of West 29th Street. And, within a couple of months after Supermac macaroni and cheese joint’s closing last November, a new vegan sit-down restaurant opened in the location on Seventh Avenue between 29th and 30th streets.

And, as these high-end eateries crop up, some retail experts say that the neighborhood is turning a corner.

Faith Hope Consolo, chairman of the retail leasing and sales division at Prudential Douglas Elliman, said that a number of other pricier shops and eateries have either made plans to open up or are eyeing the neighborhood.

Papyrus papery is close to inking a deal on the corner of 30th Street and Seventh Avenue, while lingerie shop Intimacy and gourmet sandwich and salad shop Cosi are both eyeing the neighborhood, according to Consolo.

Peter Braus, an executive vice president and principal with Sierra Realty, a retail, office and residential property management group, said that even restaurants a few blocks south of the busier Midtown office areas can nab customers, noting that real estate in Midtown can be a bit too pricey for some shop owners.

“For these companies that want to take advantage of that [office] area [in Midtown] they have to be a little bit south or east,” Braus said.

Herald Square and the surrounding region have rents averaging $413 per square foot, less than half of the $1,000 per square foot found up the avenue between 42nd and 47th Streets, according to CB Richard Ellis data from the fourth quarter of 2009.

David Berger, a senior leasing agent with Bernstein Real Estate, which manages the Pret A Manger location and an adjacent vacant space, said that his firm has worked hard to pick tenants that would be good for the neighborhood, noting that Pret A Manger was a prime pick for the corner space at 29th Street and Seventh Avenue.

“We didn’t want to just lease it to anybody,” Berger said. “I could have leased it to any wholesaler… but we wanted to do something [good] for the neighborhood.”

Berger said he has similar aspirations for 342 Seventh Avenue, a 500-square-foot space next door to the soon-to-arrive Pret A Manger. Although he said there are no front runners for the space, which will come with an approximately $11,000-per-month rent, Berger noted that a wine bar, a couple of coffee bars and a pasta eatery have all looked at the space.

New development projects

While a few new eateries do not necessarily denote a retailer revolution, Timothy King, a principal with commercial real estate services firm CPEX Real Estate said that upcoming projects, like the Moynihan Station at nearby 421 Eighth Avenue between 33rd and 31st streets, which will transform the post office adjacent to Penn Station into a rail hub, could lead to a continued trend. He said that while some retailers might have shied away from Seventh Avenue in the upper 20s and lower 30s in the past, the future Moynihan development has ignited some retailers’ drive to move into the area.

“Ten years ago… you went to Penn Station and you scurried to your home and hoped you didn’t get mugged,” King said. “I don’t think you need to be a genius to realize that [it’s] an area that’s underserved. A prescient retailer wants to get in ahead of time.”

Berger said that a transformation of the industries in the area — from the long-time furriers that once populated the area to “new media, architects, and publishing” — has had a significant effect on the eateries in the corridor.

Lon Rubackin, managing director of GFI Retail Group, a branch of GFI Capital Resources Group, said that the change in the neighborhood has large influences at play, such as project hopefuls — the Moynihan Station, the Hudson Yards development and the rehabilitation of Madison Square Garden.

“My sense is Midtown is creeping down and out,” Rubackin said.

And there are also new residential developments which have come to the surrounding area, creating a demand for new retailers.

The Vornado effect

Rubackin said that even though he believes “the hub of the area is still Macy’s,” one Vornado property, 435 Seventh Avenue on the corner of 34th Street, which currently houses an H&M clothing store that opened a few years back, has improved the area.

“H&M made a significant impact,” Rubackin said. “Having a national chain on Seventh Avenue has improved the area.”

As owner of the Manhattan Mall, 1 Penn Plaza, 435 Seventh Avenue and 431 Seventh Avenue, which, combined, contain around half a million square feet of retail space, on top of the thousands of square feet it owns elsewhere in the area, Vornado pulls weight in the neighborhood.

“Vornado has been so successful at raising the bar of the retail around there,” Braus of Sierra Realty said. While he acknowledges that the shifting economic landscape might have something to do with higher-end eateries migrating south from Midtown’s heart because of a chance to get lower rents, he’s reluctant to peg the shift solely to financial causes.

“It’s much more because of the transformation that Vornado has engineered,” Braus said.

King with CPEX said that Vornado’s investment in the region over the last decade has helped the area make significant strides.

“Vornado was a game changer,” King said of the neighborhood. “It’s a classic example of a rising tide raising all the boats.”

Vornado officials declined to comment.

“Ever since Vornado came in and redid the [surrounding] office space… that area has dramatically improved,” Consolo of Elliman said. “They know how to create a better looking product… and that’s created a domino effect to properties [to the south of 34th Street] that aren’t under their control.”


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