The Real Deal New York

57th Street retail on the rise

Dowdy Midtown strip gains buzzed-about restaurants, retail
By C. J. Hughes | November 01, 2014 07:00AM
111 West 57th Street

111 West 57th Street

With developers seemingly locked in a contest to build the tallest condo tower on 57th Street, many eyes have focused upward. But the busy 15-block stretch of Midtown, which for much of the 20th century was known for art galleries, is experiencing notable changes on the sidewalk level, too.

In the street’s core retail district, from Lexington to Eighth Avenues, developers have snapped up retail spaces for record prices, chefs have created a trendy restaurant row and storefronts are turning over for the first time in decades.

What’s more, blocks outside the core may also become shopping destinations soon. The glass pyramid being built by the Durst Organization at No. 625, at the street’s relatively desolate western end, is slated to have 55,000 square feet of retail wrapping much of the base of the 709-unit rental tower.

No commercial leases are yet signed in the building, which opens in January 2016, a Durst spokesman said. The brokerage firm Lee and Associates is marketing the space.

Also yet to find tenants are the retail spaces at One57, the 90-story condo that’s drawn recent attention to the thoroughfare with its near-$100 million apartments, and helped earn it the nickname “Billionaire’s Row.” Extell Development is incorporating about 5,300 square feet of retail into the tower’s base, where a 25-story, 210-room Park Hyatt hotel opened in August. Isaacs and Company, which is handling leasing, did not return a call for comment.

To be sure, parts of 57th Street can still seem downscale, if not downright shabby. No. 45, near Avenue of the Americas, is home to a Sleepy’s mattress store. A gift shop selling T-shirts is near Seventh. And the same chain stores that dot corners throughout the city — pharmacies and banks — are prevalent, along with the handful of galleries that haven’t yet decamped for West Chelsea.

Meanwhile, average asking rents on the strip, about $500 a square foot, aren’t close to the $3,000 being listed on nearby Fifth Avenue, brokers say. But some spaces are now being marketed for $2,000 a foot. And sources suggest that when luxury department store Nordstrom opens in 2018 (in another new high-rise at No. 225), it’s not inconceivable that parts of 57th could reach parity with posh Fifth.

“I don’t see change happening overnight,” said Robin Abrams, an executive vice president at the Lansco Corp., who focuses on retail leasing but currently is not marketing any spaces on 57th Street. But, she continued, “that whole corridor will be more upscale, as fashion-oriented tenancies consider sites they never had before.”

Below, The Real Deal examines the most notable changes on a transitional street, from east to west:

123-135 East 57th Street

For 57th Street to become less disjointed, a row of empty retail spaces along the north side of the street, between Lexington and Park Avenues, should be filled with tenants, brokers say. If upscale stores can be installed there, they add, shoppers might funnel from nearby Bloomingdale’s department store, on Lexington, to points west.

Many of the spaces are owned by Cohen Brothers Realty Corp., including five berths — with the addresses 123, 125, 127, 131 and 135 — at the base of 135 East 57th Street, a granite-clad office high-rise with a circular plaza. All told, the spaces encompass 72,000 square feet, across multiple levels, and are also being marketed as a single store “in the heart of the Bloomingdale’s trade area,” according to the listing.

A luxury retailer leasing there would be a sign of upscaling. That’s because Daffy’s, the now defunct discount clothing store, had most of the space from 1994 to 2012, and was paying about $40 a foot, or $2 million a year, according to a TRD report. Cohen and Daffy’s tangled in court, about what Daffy’s said were strong-arm tactics to evict it, before the retailer filed for bankruptcy in 2012 and closed.

It’s unclear what the space would lease for today. The asking rent was unavailable in the public listing, and Alan Schmerzler, a Cushman & Wakefield agent who is marketing the space, did not return a call seeking comment. Charles Cohen, the chief executive of his firm, also did not return our call.

But the rents would presumably be far higher than the $80 a square foot that it supposedly could fetch in 2010, according to court documents.

Another chunk on the block controlled by Cohen is the 43,000 square feet of retail space at 465 Park Avenue, the prewar 1926 residential co-op known as the Ritz Tower. It used to contain a Borders bookstore. Cohen bought the 39,000-square-foot space from Shorenstein Properties in 2009 for $22 million.

Leasing this space has been somewhat contentious, too. A surgery group was supposed to rent 13,300 square feet at $1 million a year, but then backed out, prompting Cohen to sue it for $25 million last winter, according to news reports.

The space, which also has the address 111 East 57th, is still empty, but building permits line a window there.

432 Park Avenue

Another property that brokers say could connect the ho-hum east side of 57th Street with its ritzier western half is the commercial space at this neck-craning 104-unit condo, which at 1,396 feet and 96 stories topped out last month as the tallest residential building in the Western Hemisphere.

The 75,000 square feet of retail at the building, which is being developed by Macklowe Properties and the CIM Group, will include more than 80 feet along 57th. Macklowe owns the space, which is made up of three condo units; he purchased it for about $6,000 a square foot during the summer.

Macklowe may have bigger plans for stores, too. A 33-story tower next door, 450 Park Avenue, that Oxford Properties Group and Crown Acquisitions bought in the spring for $546 million, has 35,000 square feet of sidewalk-level retail of its own. As TRD reported in May, Macklowe has had talks with those landlords about buying their retail space, to create a larger berth.

A message left with the project’s marketing team was not returned. CIM declined to comment.

Abrams, the Lansco broker, believes that $1,500 a square foot would not be impossible at the site: She noted that a corner berth at 575 Madison, at East 57th, a slightly higher traffic area, is now being marketed for $1,900 a foot. Its current tenant is Geox, an Italian shoe chain.

“I think it’s challenging because it’s a great retail corridor, but it’s not quite there yet,” she said.

6 East 57th Street

Among the large blocks of space that are turning over on the street is this one: Niketown, the sneaker and sportswear purveyor that has been in place there since the 1980s. Though Nike’s lease with landlord the Trump Organization is not up until 2017 (and it could extend that lease for three five-year increments), the company has been looking at other storefronts, brokers say.

Connected to the shopping mall portion of Trump Tower, as well as the bamboo-lined atrium at adjacent 590 Madison Avenue, Niketown, with 25,000 square feet across five floors, was packed on a recent afternoon.

But brokers say that the company wants to be in an even more tourist-friendly part of Midtown, which is why last winter it was exploring a 41,000-square-foot berth at 640 Fifth Avenue, a Vornado Realty Trust building where clothing retailer H&M is today.

A spokeswoman for the Trump Organization declined to comment.

16 West 57th Street

Sensing the street’s turnaround, more developers seem to be starting to flock in. In August, Extell sold this empty lot to an LLC that city records identify as SM Consultant.

The price was a hefty $95 million.

The Daily News identified the buyer as the Fasano family of Brazil, which owns hotels and restaurants; the 100,000-square-foot tower that can be built there will likely be a hotel-condo, presumably with a retail or restaurant component.

The previous building on the site was demolished in 2012. As of mid-October, no new building permits had been filed. A message left for Sergio Millerman of the Brazilian-American Chamber of Commerce in New York, who has spoken for the family in the past, was not returned.

Brokers, meanwhile, say the street could in a few years command more than $1,000 a foot.

41 West 57th Street

On a thoroughfare whose best-known restaurant for years might have been the Russian Tea Room (No. 150), a handful of buzzy restaurants opened recently. The best-known may be Betony, which debuted at 41 West 57th in spring 2013. The airy 7,200-square-foot two-level space, which seats 120, serves lobster, dry-aged beef, foie gras and kale — and critics have swooned.

In many ways, the arrival of its short-lived predecessor, Brasserie Pushkin, in 2012 helped usher the street’s transformation from dowdy to more fancy.

But Steve Rappaport, a broker with Sinvin Real Estate who brought Pushkin to the building, said owner Andrey Dellos has a 15-year lease at “less than $500 a foot.”

He did say, though, that the makeover of the area is not surprising. “If there is a certain clientele living there, retail will eventually service it,” he said. “That’s what is happening now.”

Along those lines, the retail space containing a branch of Strawberry, the apparel chain, is now on the market, as another longtime presence turns over.

Set back in a four-story low-rise at No. 49, the ground-floor Strawberry slot is now on the market for $325 a square foot for a 7-year term, brokers say. A call left with Andy Ackerman, a listing agent for owner Vornado Realty Trust, was not returned.

101 West 57th Street

This bustling corner, at the Avenue of the Americas, perhaps best epitomizes 57th’s new look. For decades, the plain-jane brick 1929 building on the northwestern corner was home to the Buckingham Hotel. Popular with artists, its guests over the years reportedly included Georgia O’Keeffe, and opera stars Giuseppe De Luca and Giovanni Martinelli.

But in 2010, a partnership including Danny Errico, the founder of Equinox gyms, sold the aged 100-room property to UBS Realty Investors of Hartford, Connecticut, for $60 million, according to city records. After a two-year renovation, the property was then converted to the trendy 208-room Quin Hotel New York, which opened last fall. On nightstands, touch-screen tablets control music, lights and air-conditioning.

A similarly striking transformation took place downstairs. The high-ceilinged 16,000-square-foot retail space there housed Wolf’s Deli for 25 years, until 1996, when the deli left after a rent dispute, according to news reports. Short-term pop-up shops followed.

As of last winter, though, the space has boasted the Wayfarer, a splashy new food purveyor with tufted banquettes where an entrée of Maine scallops is $35.

Not to be outdone, Quality Italian, an offshoot of the local steakhouse Quality Meats, has taken a two-floor, 11,300-square-foot window-lined berth across the street, at 57 West 57th Street, a 20-story prewar office building with gold details and 162,000 square feet. That restaurant, reached from Sixth Avenue, opened in 2013.

A message left with Michael Joseph, a Colliers International agent handling leasing at No. 57, was not returned.

111 West 57th Street

JDS Development Group and the Property Markets Group, the development team behind Walker Tower, is planning to put up a slender 1,350-foot tower at this site, which includes two parcels: an empty lot, and the landmarked Steinway Hall building from Warren & Wetmore, the architectural firm that worked on Grand Central Terminal. The 1925 building will be incorporated into the tower’s design.

In summer 2013, the developers shelled out $178 million for the site, which included transactions for the land as well as the building that leases it, according to city records.

Designed by SHoP Architects, the spear-like building will contain about 50,000 square feet of retail, including both the Steinway building and a new modern section to the east of it, according to sources close to the project. The retail space is not yet being marketed, and no brokers have been selected. The entire complex is supposed to open in 2016.

It was an active construction site on a recent afternoon.

124 West 57th Street

Another hotel-restaurant combo to make waves is the one-two punch of the Viceroy, a ground-up 240-room hotel that debuted last year, along with its street-side dining offering, Kingside Restaurant. In mid-October, it hosted a party for the premiere of the Brad Pitt movie, “Fury.”

And in a telltale sign for the strength of the market, the 29-story building was sold before it really fully opened. In September 2013, American Realty Capital New York Recovery, a real estate investment trust, bought the building for $149 million — or more than $600,000 per room — from developer ARK Partners. Rates for rooms at the hotel (half of which face Central Park) started at about $400 a night for an October weekend.

That per-room sales figure “is a great number, but not outrageous,” said Michael Azarian, an agent with Massey Knakal Realty Services and a retail specialist.

However, in a once passed-over neighborhood, “I think the deal just speaks to the general demand for the area,” he said.

227 West 57th Street

The biggest spark for 57th Street’s reinvention, many brokers say, will be the arrival of a 1,775-foot tower here whose base will contain the first New York outpost of Nordstrom, the West Coast-based high-end department store. Developed by Extell, the store portion will encompass 285,000 square feet across seven stories, according to a Nordstrom spokeswoman; its flagship Seattle store has five floors.

Currently a hole in the ground, the project is being built on the site of the first New York location of the Hard Rock Café, which moved to Times Square in 2005. It’s forecast to be completed in 2018, the spokeswoman said.

While shoppers will undoubtedly descend on the department store, a far-reaching revival of the street’s fortunes will hinge on whether other luxury retailers’ stores open around Nordstrom’s. Otherwise, “people will just get in cabs and go home,” said Lansco’s Abrams.

What has held back the street in general is the dearth of spacious retail berths that are common elsewhere, Azarian said. “This has been a transitional challenge,” he noted, adding that the Nordstrom project has changed the overall calculus in a big way.

220 West 57th Street

One developer who seems to be pinning its hopes on the Nordstrom effect is Thor Equities, which is in contract to buy a four-story retail building across the street from the site.

That building, a four-story 1897 Gothic landmark originally built for the American Society of Civil Engineers, is today home to Lee’s Art Shop, a surviving trace, in a sense, of the area’s once-strong artistic heritage.

Joseph Sitt, Thor’s chief executive, who has aggressively snapped up retail properties in fashionable neighborhoods like Soho in recent years, agreed to purchase the site last summer, TRD reported; a price for the 22,000-square-foot structure was not disclosed.

The sale had not been finalized by mid-October, property records indicate. A spokesman for Thor did not respond to a request for comment by press time.

“It’s a smart buy on a street that is undervalued for retail,” Joanne Podell, a vice chairman at the brokerage Cushman & Wakefield, told TRD last summer.

Sitt seemed to sum up the thinking of many in a statement when the deal came to light: “With a series of luxury condos and hotels joining an already robust commercial market, and landmarks like Carnegie Hall, West 57th is primed to become one of the hottest streets on the entire island of Manhattan.”