On a recent spring day in the Meatpacking District, a group of tourists argued over dinner plans as they stepped off the High Line onto 14th Street, two girls walked into stalled traffic to Instagram the streetscape behind them and three neon-vested construction workers stood at the curb discussing the many visible changes in the neighborhood.
This all took place in front of Jeffrey New York, the pioneering luxury clothing store that Jeffrey Kalinsky opened in 1999.
“I didn’t have any money [at the time],” Kalinsky told The Real Deal, explaining why he chose this corner of Manhattan. It was also far enough away from Soho and Fifth Avenue that designers would let him sell their products without fear that he might cannibalize existing sales, he noted. Kalinsky said he paid $21 per foot for the 12,000-square-foot retail space nearly 20 years ago.
Soon enough, he was joined by Stella McCartney and Alexander McQueen. With such stores, plus Chelsea Market, the Standard and the iconic Parisian bistro Pastis, the area started to become known for its mix of fashion, food and nightlife. And the last meat-packer closed its doors in 2012.
Two decades later, Jeffrey New York is still there — on the border between Chelsea and the Meatpacking District — selling Valentino stilettos and Chloé cocktail dresses in its airy, white space. But today, the store is surrounded by food and fashion tastemakers, the Whitney, the High Line, Google and a crop of new concept stores. And retail rents along West 14th Street now range between $250 and $350 per foot, according to one commercial broker familiar with the area.
The Meatpacking District has become a notable exception in Manhattan’s retail scene. The neighborhood was the only submarket in the borough to buck the retail slump in the beginning of the year, according to a recent report from Cushman & Wakefield. Asking rents in every other shopping corridor in the city fell, they but rose five percent year-over-year in the Meatpacking District to an average $371 per foot.
Many see the area as a prime destination in the city in 2018 — a big change from just a few years ago, when Soho held the crown. The luxury brand collective Marcus Lemonis Fashion Group opened its first retail store in the neighborhood last month, and Hyundai’s luxury line Genesis signed a 40,000-square-foot lease at Aurora Capital Partner’s 40 Tenth Avenue tower in December.
The looming question is whether the area’s retail renaissance is starting to peak or if there’s plenty more room for growth.
The availability rate in the neighborhood is close to 27 percent, according to Cushman, though some of that is due to shifting boundaries. “Over the past few years in the Meatpacking District, brands shifted their sights to Washington Street, which they viewed as more fashionable than West 14th Street,” the Real Estate Board of New York’s Spring 2018 Manhattan Retail Report states.
The neighborhood is also undergoing a ton of construction as the city nears completion on restoring its cobblestoned streets and plazas, and several new development projects rise along Gansevoort and 14th streets.
Industry players point to many of the same reasons for the Meatpacking District’s vibrancy: The High Line deposits the tourists, Google supplies the daytime commuters, Instagram sends the influencers, and Chelsea and the West Village provide a steady stream of local residents.
In addition, several stores are trying out new retail concepts within several blocks of one another. Many use buzzy language to describe what they’re doing: Samsung’s flagship store at 837 Washington Street is a “digital playground,” and the Starbucks Reserve Roastery at Aurora and Vornado Realty Trust’s 61 Ninth Avenue is “coffee theater.”
Lexus, meanwhile, is partnering with Danny Meyer to run a restaurant, café and event space in its upcoming Intersect by Lexus store at 412 West 14th Street. And the high-end home goods retailer Restoration Hardware is opening a concept hotel in a landmarked five-story building at 55 Gansevoort Street.
The Meatpacking District has become the leading neighborhood for “experiential retail” in New York, said Will Silverman, head of investment sales at the commercial brokerage Hodges Ward Elliott. Silverman and his colleagues are helping the real estate firm Tavros Capital Partners find an equity partner for its mixed-use redevelopment project at 44 Ninth Avenue.
“Usually, you tie the commerce to an existing destination, but in this case, the commerce itself is becoming a part of the destination,” he noted.
Josh Strauss, an executive vice president at the retail brokerage RKF, said the Meatpacking District attracts a blend of fashion and tech companies that want to be “New York City cool.”
“The common denominator, in my opinion, is forward-thinking retailers and brands that really get it: that the world is changing, and they need to create stores that will really captivate people,” said Jared Epstein, a vice president and principal at Aurora, one of the most active property owners and developers in the area.
Epstein said the Meatpacking District is very attractive to developers due to its location and surrounding attractions, as well as its mix of old and new architecture. Aurora, which made its first real estate investment in the neighborhood in 2009, is converting five buildings along Gansevoort into two large commercial properties with William Gottlieb Real Estate and architect Morris Adjmi. The project will bring another 50,000 to 100,000 square feet of retail space to the area in 2019.
When the French fashion company Hermès announced that it was opening a 10,000-square-foot store at the redeveloped site, it said the new location would have a “downtown feel” and appeal to a younger and techier crowd.
Hermès U.S. president and CEO, Bob Chavez, told TRD that the upcoming store will include a small café, where customers can stop for coffee or a glass of wine, as well as a rooftop terrace. He said the new location will be more casual than the company’s flagship store on Madison Avenue.
The Meatpacking District’s mix of tourists, daytime workers and nearby residents offers a major boon for store owners, Chavez added. “It has that triple combination, which is magical for any retailer,” he said.
In turn, retail brokers who work in the area are also catching a windfall.
“We have demand from tenants, and we have offers,” said RKF’s Strauss, who represents several landlords in the Meatpacking District. “That can’t be said for some tried-and-true retail destinations.”
The neighborhood’s office market is seeing a similar trend. Following Google’s colonization of the area — and its $2.4 billion purchase of the Chelsea Market building at 75 Ninth Avenue — other tech companies want in, and landlords aren’t shy about asking rents. Average office asking rents in the neighborhood rose to $100 per foot at the end of last year, up from $78 in 2016, per Cushman.
“We own all over the place, but this is the neighborhood [with the most upside],” Aurora’s Epstein explained.
Kalinsky, however, said it’s hard to see why the Meatpacking District has become the hottest Manhattan neighborhood of the moment. “I love the Meatpacking, I love the Whitney, I love Chelsea Market, but this is not a high-traffic area” compared to Soho and Times Square, he argued.
Will experiential shopping translate to hard sales? It’s hard to say. And will the Meatpacking retail phenomena be sustainable or replicable? Nobody knows.
“I don’t mean to knock myself,” Kalinsky said, “the answer just hasn’t come to me.”