NYC’s growing retail pipeline

Retail projects surge to meet growing and unmet demand
By Rich Bockmann | December 01, 2015 07:00AM

 retail-pipeline One of the long-held truths in New York real estate is that the city is woefully under-retailed.

Last year, Barbara Byrne Denham, an economist at REIS, crunched the numbers on retail sales data from the 2007 national economic census. What she discovered were some striking disparities between the outer boroughs and the rest of the country.

Residents in the four outer boroughs, she found, spent less on retail purchases than the average American, who shells out $8,344 a year on everything from new shoes to the latest tech gadgets.

The most striking gap was in the Bronx, where the annual average of $3,362 per person was 60 percent below the national average. Queens, meanwhile, was 40 percent below the average, followed by Brooklyn at 39 percent and Staten Island at 24 percent.

“All the data suggests the Bronx and Queens especially are under-retailed,” Denham told The Real Deal. “And Brooklyn as well, just not as much.”

Even in Manhattan, which is home to arguably the most famous retail corridors in the world, looks can be deceptive.

“When it comes to the ultra-upscale like Barney’s and Louis Vuitton, Fifth Avenue and Madison, I think we’re probably just right,” said HFF broker Eric Anton, who specializes in development-site sales. “I think we’re probably under-retailed when it comes to big-box tenants. If you look at Paramus in New Jersey or Roosevelt Field [on Long Island], they’ve got every brand known to man.”

And although mega-projects like Hudson Yards and Manhattan West will have a transformative effect on the Far West Side, the amount of housing and office planned for the neighborhood is expected to create a demand for shopping and services that far exceeds the retail created by those developers.

retail-pipeline-quote“The [Far] West Side is the most underserved in terms of retail in all of Manhattan,” said Kenneth Himmel, president and CEO of Related Urban. “Even with what we’re doing it’s a fraction of where the demand is.”

But the good news is that there’s a lot in the pipeline.

A cross the five boroughs, there were 4.8 million square feet of new retail either under construction or undergoing major renovation in the third quarter, according to data from the CoStar Group. That’s only slightly below the last peak of 4.9 million square feet back in 2007.

Projects in the current retail pipeline for New York City are already starting to change the landscape. They range from small street-level stores covering a few hundred square feet to the 1-million-square-foot Shops at Hudson Yards. The real estate and business worlds are confident that it will all be folded into the fray quickly.

For many, the creation of retail can’t happen soon enough. The Brooklyn Chamber of Commerce recently published an economic study showing the borough is losing $6 billion worth of retail sales each year. The largest category, it found, was motor vehicle parts and dealers, which is losing $2.7 billion annually.

“The number one point is, ‘We’ve gotta build retail and we’ve gotta build it fast,’” Chamber president Carlos Scissura said. “We need mom and pop stores. We need big stores to come to the borough.”

Here’s a roundup of what’s going on in each borough on the retail-construction front.

retail-manhattanManhattan
Retail pipeline: 2.4 million square feet

The amount of retail construction in Manhattan is unprecedented. The current pipeline is 2.4 million square feet strong, and even if the retail portion of the Related Companies’ Hudson Yards project were yanked out of the equation, the borough still has more retail under construction than it did during the last peak. At the beginning of 2009, there was 1.2 million square feet of retail under construction.

Lower Manhattan has long been known as the “most under-retailed” area of the borough. But with projects like Westfield’s World Trade Center Mall, the Fulton Transit Center and the South Street Seaport, among others, the neighborhood has some 2 million square feet of new retail coming online.

On the Lower East Side, construction began this summer on the $1 billion Essex Crossing development, a 1.9-million-square-foot project that will add more than 400,000 square feet of retail to the market in phases over the next few years.

In addition to retail, Essex Crossing will consist of residential, office and community space spanning nine sites. It is being developed by Taconic Investment Partners, L&M Development Partners and BFC Partners, which were selected by the city in 2013 to remake the six-acre tract of land between Ludlow and Clinton streets that has sat vacant since 1967.

The retail portion will be anchored by a 150,000-square-foot market in the vein of Reading Terminal Market in Philadelphia and Seattle’s Pike Place Market. Other retailers will include a Regal Cinema and a Splitsville luxury bowling alley.

Over in the Meatpacking District, celebrity chef Anthony Bourdain is creating a 155,000-square-foot food mall at Pier57, also known as the “Superpier,” which is being developed by RXR Realty and Youngoo & Associates.

Bourdain has already signed on street-food vendors from Singapore and Mexico, according to a story in the New York Times. “Think of an Asian night market,” he told the paper in September. “Eating and drinking at midnight.”

retail-brooklynBrooklyn
Retail pipeline: 1.1 million square feet

It should come as no surprise that this hot borough has the largest pipeline outside of Manhattan, with 1.1 million square feet of retail either under construction or undergoing major renovation.

It’s an impressive sum, for sure, but still below a peak of 1.8 million square feet back in early 2013.

The biggest project in the works now is the shopping component of the 1.8-million-square-foot, mixed-use City Point center.

The 675,000-square-foot retail component, being developed by Acadia Realty Trust and Washington Square Partners, has already signed tenants such as Century21, Target and the beer-and-a-movie theater Alamo Drafthouse Cinema. Almost 80 percent of the available retail space is leased, according to CoStar. Asking rents are reported to be in the range of $200 to $300 a square foot for the 18 storefronts on the ground floor.

The residential, office and retail megaproject on Flatbush Avenue is a short walk from Forest City Ratner’s Barclays Center and Pacific Park, which has played large a role in reshaping Downtown Brooklyn.

In Red Hook, meanwhile, Thor Equities is planning to build more than 300,000 square feet of retail near Fairway Market and Ikea as part of its 1.7-million-square-foot redevelopment of the former Revere Sugar Factory on the waterfront.

However, it’s not just the mega-projects that are transforming the borough. In a sign of the times, the number of major retail corridors tracked by Brooklyn-based commercial brokerage CPEX Real Estate has more than doubled to 121 this year from 45 in 2009.

Many of those corridors have popped up in emerging residential neighborhoods. For example, the stretch of Fourth Avenue from Gowanus to Sunset Park has seen a boom in development after a partial rezoning in 2011 required builders to include ground-level retail in new buildings.

“There’s demand in all these markets. It’s just about finding the right opportunity,” said Ryan Condren, a retail broker at CPEX. “If you drive around Brooklyn most of the buildings are 20-foot-wide, mixed-use buildings. The challenge is that Brooklyn has smaller footprints. To find a 20,000-square-foot floor plate is very unique.”

retail-staten-islandStaten Island
Retail pipeline: 817,000 square feet

It’s no secret that Staten Island’s North Shore has seen a flurry of projects of late. Those include the New York Wheel, a 630-foot-tall Ferris wheel, as well as Lighthouse Point and URL Staten Island, two mixed-use projects that will bring a combined 1,000 apartments and 164 hotel rooms with views of Manhattan.

And, of course, there are the Empire Outlets, with a development price tag of $580 million. The BFC Partners-developed project will create 350,000 square feet of outlet space, half of it already leased to the likes of Nordstrom Rack, H&M, Banana Republic and Gap, among others.

In fact, the borough has more than 800,000 square feet of retail under construction — by far the largest pipeline the island’s seen in at least a decade.

But it may have gone unnoticed that the largest retail project in the borough is taking place in the center of the island, far from the waterfront views of Manhattan.

In the suburban neighborhood of New Springville, General Growth Properties, the country’s second-largest mall operator behind Simon Property Group, is expanding its 1.2-million-square-foot Staten Island Mall.

The 42-year-old property is set to grow by 427,000 square feet, making room for an expansion by its anchor tenant Macy’s, as well Fairway Market, Dave and Buster’s, Shake Shack and Zara.

The mall operator will also welcome Primark, the fast-fashion import from the U.K. similar to H&M and Forever 21.

GGP CEO Sandeep Mathrani said the expansion is geared at retailers looking to sell to 550,000 locals who visit the mall each year.

“It’s the only mall on Staten Island. So effectively, it is just to serve the demand of people on the island,” he said during the company’s second-quarter earnings call last year. “The mall is over a $600-a-square-foot mall.”

The buzz on the island is that GGP decided to overhaul the property to compete with the outlets being developed at the St. George Ferry terminal, which is just one of several big-ticket projects in store for the borough.

In the New Dorp section, a middle-class beach-side community on the eastern shore, Kimco Realty plans to redevelop a strip mall called Hylan Plaza into a $150 million, 400,000-square-foot modern shopping destination dubbed the Boulevard.

And on the western side of the island, Melohn Properties recently announced plans to build Riverside Galleria, a 457,000-square-foot shopping complex at the foot of the Outerbridge Crossing connecting the borough to Perth Amboy in New Jersey.

James Prendamano, a managing member at Staten Island’s Casandra Properties who is leading the leasing efforts at the Empire Outlets and Riverside Galleria, was at the international shopping-center conference MAPIC last month in Cannes, France, talking to worldwide luxury brands that historically haven’t given much thought to the borough. He said Staten Island’s new real estate projects are drawing interest from retailers who not too long ago may have considered the borough a foreign country.

“It’s easy to look at Manhattan or to look at Brooklyn . . . there’s such density that it’s almost a no-brainer to have locations in those markets,” he said. “But when they hit a saturation point, they start to look for new opportunities, and they’re looking to Staten Island.”

retail-bronxThe Bronx
Retail pipeline: 433,000 square feet

While the Bronx is the midst of a residential development boom, with investors rushing to get in before land and building prices get too high, retail is also seeing a new wave of interest.

The borough has seen a handful of big-box shopping centers and malls open in recent years, but it’s still thought to be overdue for a big retail development wave. And investors hungry to capitalize on the room for retail growth in the Bronx have already swooped in.

Next month, the doors will open at the 162,000-square-foot Riverdale Crossing center.

The Van Barton Group, formerly Emmes Asset Management, paid $130 million in October to buy the Kingsbridge shopping center from developer Metropolitan Realty and its partner Angelo, Gordon & Co.

The two-building project is anchored by a BJ’s Wholesale Club, and has also locked in tenants such as Buffalo Wild Wings, Petco and Smashburger.

“The outer boroughs are under-retailed,” Van Barton director Seble Williams said at the time of the deal, echoing others’ sentiments. “Riverdale Crossing responds to the significant unmet consumer demand in the Bronx.”

The largest project on the board is Baychester Square, a 350,000-square-foot, open-air shopping center in the East Bronx adjacent to the 780,000-square-foot Bay Plaza mall. Bay Plaza represented the  first indoor, suburban-style mall in the city in 40 years when it opened its doors last year.

Developers Grid Properties and the Gotham Organization are making room for 1,200 parking spaces at Baychester Square, which sits south of Co-op City and at the intersection of I-95 and the Hutchinson River Parkway.

In the buzzworthy South Bronx, the Chetrit Group and Somerset Partners plan to develop a pair of residential towers with 1,200 units and a very small retail component in a part of Mott Haven they’ve dubbed the “Piano District.”

Not far up the borough’s famed Grand Concourse, Youngwoo & Associates is reimagining the landmarked 1937 Bronx General Post Office as a 150,000-square-foot shopping center with plans for a possible market and a rooftop restaurant or beer garden.

Ripco Real Estate broker Miles Mahoney said that while some projects are building along existing retail corridors in the borough, others — such as the 300,000-square-foot Throggs Neck Shopping Center that opened last year — are transforming former industrial areas into retail destinations.

“Some of it’s kind of hard to figure out, ‘What is the market for this particular project?’ because there’s nothing like it to compare it to,” he said. “A lot of it’s virgin territory.”

retail-queensQueens
Retail pipeline: 334,000 square feet

All eyes were on Flushing this summer when the Blackstone Group made a monster purchase in the neighborhood. The firm shelled out nearly $400 million to buy the parking garage and 800,000-square-foot retail component at the mixed-use shopping-and-condo Sky View Parc complex.

But compared to 2007, when the duo of Muss Development and Onex Real Estate Partners kicked off construction at Sky View, there’s currently a dearth of new retail under construction in the borough.

There’s currently about 334,000 square feet of retail under construction or under major renovation, according to CoStar, compared to a peak of 1.7 million square feet back in 2007.

And Flushing’s other much-watched retail project — the biggest one on the books for Queens — still has a ways to go.

Work is underway on the first phase of the 1.8-million-square-foot, mixed-use neighborhood-within-a-neighborhood dubbed Flushing Commons, which is being developed by a partnership of F&T Group, the Rockefeller Group and AECOM Capital. When all is said and done, it will have roughly 230,000 square feet of retail space. The developers are currently focusing on building the project’s 600 condos, but the retail will be included in Phase 2 of the project.

“We’re going to start mobilizing the sellout around the middle of 2017, and then we’ll start to get going [on the retail],” said F&T president Michael Meyer. “It’s still several years out in the future.”

In Southeast Queens, United American Land is redeveloping a trio of derelict buildings in Jamaica into a 150,000-square-foot big-box center that has already signed Burlington Coat Factory to take about half the space.  The asking rent was reported at $55 per square foot.

The commuter hub of Jamaica was once a thriving shopping district, home to department stores Macy’s and the now-defunct Gertz and Gimbels stores. The area is now looking to regain some of that luster.

Across the street from the Long Island Rail Road station, BRP Development is planning to bring 100,000 square feet of ground-floor retail to the Crossing at Jamaica Station, a pair of residential buildings with 580 units.

And further east, the Blumenfeld Group, the developer behind the East River Plaza in East Harlem, has plans to build a 180,000-square-foot shopping center on the site of a parking lot on 168th Street.

In Western Queens, Long Island City is scheduled to get roughly 137,000 square feet of retail shopping at the base of Alma Realty’s retail-and-office development at 30-30 Northern Boulevard.

The area, sources say, needs more shopping options. Despite an influx of new residents, it is still considered to be vastly under-retailed.

“I think a lot of it is people’s shopping patterns,” said RKF broker Barry Fishbach. “More residents are shopping in Manhattan than they are in their immediate neighborhood.”