A neighborhood’s fortunes can be gauged by the kind of shopping that happens in its stores. For an example of a change for the better, look no further than East 23rd Street, one of Manhattan’s most heavily trafficked retail corridors. Fast food joints stand beside the occasional posh bar, and $10 clothing stores butt up against designer fashion outlets.
East of bustling Chelsea and north of stately Gramercy Park, the corridor has lagged behind hipper areas in its retail offerings. But as condo conversions blossom around Madison Square Park and a new Business Improvement District comes closer to fruition, the neighborhood is growing up.
The East 23rd Street retail stretch serves businesses such as Credit Suisse First Boston on Madison Square Park, and further east, caters to students at the School of Visual Arts and CUNY’s Baruch College. Over the years, the side streets to the south in the area have attracted furniture showrooms and restaurants.
Brokers say the area is trying to extend its appeal beyond local students and office workers, and getting more of a weekend crowd.
“You might have thought of this as a five-day neighborhood,” says Robin Abrams, executive vice president of the Lansco Corp., which specializes in commercial leasing and consulting. “But now, if you walk around on the weekends, it’s pretty vibrant and it’s pretty busy. It’s become a seven-day-a-week neighborhood.”
Chain stores, including Home Depot, have raised the profile of national retailers just west of Fifth Avenue, and that’s pulled in banks, bars, and restaurants. Madison Square Park got a massive facelift in 2001, spurring the reinvigoration of the area.
The shift is exemplified by local bars like Speak, on East 23rd between Madison Avenue and Park Avenue South, which opened in the fall of 2005. It sits on the former home of Teddy Red’s, a rough and tumble joint that appealed to a younger demographic.
“They mostly had the NYU crowd, 21- to 25-year-olds,” says Sunkul Soni, Speak’s manager. “Now we get corporate clients from Credit Suisse and models from Elite,” which has its offices at 111 East 22nd Street.
The swing from students to supermodels could be accelerated by the explosion of high-end residential development in the area. One Madison Avenue, purchased last year by SL Green Realty Trust, is going condo in a project the company is undertaking in partnership with hip hotelier Ian Schrager.
Nearby, the Gift Building’s 12 stories are going residential, as are the 1.2 million square feet of the International Toy Center, which was home to the toy industry for more than 50 years. And new construction is rising along with conversions: a luxury 50-unit building at 158 Madison Avenue by Thorwood Real Estate, a partnership between Buttonwood and Thor Equities, is in construction, for example. “Every time I walk down the street and I see a bunch of low-rise buildings, I say that’s going to be a luxury condo at some point in time,” says Mark Stein, senior vice president and director of leasing for Meringoff Properties.
As high-end residential moves in, one obstacle the 23rd Street corridor must overcome is poor sanitation, says Sharon Ullman, president of the 23rd Street Association, which has been working with the city’s Department of Small Business Services to negotiate a Business Improvement District for the area, to be called the Flatiron 23rd Street Partnership.
“The number one complaint we get is that the district is dirty,” says Ullman. “It’s because we have the big-box stores and because we have high-end retail, and because we have a lot of residential on the periphery, that there’s so much more traffic and so much more dirt. If you’re on the corner of 23rd and Park Avenue South, you’re almost up to your ankles in garbage.”
The main services of a Business Improvement District will be additional sanitation, security, and marketing for the area. “The largest piece will be sanitation,” Ullman says.
Mayor Bloomberg signed off on the BID in December, and a certificate of incorporation is going around to business owners now to be signed. The BID is expected to be funded with a $1.5 million annual budget by July and will start services as early as September.
While the improvement district of 1,376 buildings and 4,927 businesses will provide extra sanitation and security, it won’t mitigate other problems.
“What we’ll probably need to come in will be service-oriented businesses, like supermarkets, dry cleaners, locksmith, shoe repair,” Ullman says. Still, she’s not worried about the dearth of such businesses now. “The more residential that builds out, the more services will come.”
But some worry if such shops can afford to move to an area increasingly geared toward more high-end residential.
Abrams of Lansco says commercial rents in the larger Flatiron District in general are quite variable; some could be well below $100 per square foot, while others might climb as high as $400.
“There’s no rule of thumb,” she says. “Some blocks with fast food and icky stuff could be $80.” Even if rent rates vary, space is in high demand. “There’s not a heck of a lot that comes available often. And when it does, there’s a lot of competition.”
Stein agrees. “Before the space is empty,” he says, “we’re getting offers and requests to see space from brokers.”
If small businesses are in danger of getting the boot in favor of higher-paying tenants, though, neither Stein nor Abrams have come across it. But they acknowledge the flavor of the neighborhood has changed, and some small businesses are packing up.
“A lot of that stuff disappeared over the last few years as the high-profile tenants have come in,” Abrams says, but asserts that most landlords won’t be holding out to try and get higher rents. “If they have a good opportunity for a tenant, they won’t sit on a space thinking values will increase.”
Ullman says almost every business embraced the idea of the BID — the city requires that 51 percent of local businesses agree before a BID can be formed — and everyone agrees it will help redefine the 23rd Street corridor, and prepare it for its conversion. “The BID,” Stein says, “is a real estate public relations machine for the area.”