Maybe they should call it HiFi.
With a rise in condominium conversions and new residential construction, the section of Fifth Avenue north of Madison Square Park is in the middle of a changeover in its retail stock.
The area, which has long been considered a “no man’s land” of vacant storefronts, Class B office space and wholesale retailers catering to decorators, has been a stepsister of the more famous posh Fifth Avenue shopping district 20 blocks north. In the past, retail spaces in the neighborhood have rented for as little as $20 a square foot.
Fifth Avenue between 23rd and 30th streets is now lined primarily with small showrooms for rugs, furniture, decorating supplies and art. The average for retail space in the area now is between $100 and $150 a square foot.
Yet with the arrival of new residential projects including Elad Properties’ conversion of the 12-story Gift Building at 225 Fifth Avenue at 26th Street; the Chetrit Group’s pending conversion of the 1.2-million-square-foot International Toy Center at 200 Fifth Avenue at 23rd Street; and the Clarett Group’s 54-story Sky House rising at 11 East 29th Street, the neighborhood is beginning to see a transition in its retail spaces.
Concurrently, gentrifiers are attempting to find a name for the new neighborhood that will stick. The area, which is sandwiched among several successful real estate boomlets, has been alternately called NoFi (for “North of Flatiron”) and SoFi (for “Southern Fifth”).
“It has been a deep discount area and a deep manufacturing area,” says Faith Hope Consolo, chairwoman of the retail leasing and sales division at Prudential Douglas Elliman. “It has struggled for an identity.”
Currently, several retail vacancies dot the landscape between 25th and 27th streets: there are slots at 212 Fifth, 220 Fifth and 226 Fifth.
Consolo, who is handling leasing for 226 Fifth Avenue, says she expects the 1,000-square-foot space to be leased out within the next quarter. The space is currently asking $100 a square foot.
According to Patrick Breslin, president of the retail group at GVA Williams, retail on this portion of Fifth Avenue has long suffered in the shadows at the end of the tourist district at the Empire State Building, along with the shopping pathway leading toward Macy’s and Herald Square to the west. The shops of the Flatiron District to the south have been a draw, with customers rarely venturing north.
Chase Welles, senior vice president with Northwest Atlantic Partners, says the changeover is centered now in development of service businesses for the new residents. Banks have been the first arrivals with restaurants beginning to arrive not that far behind.
The banks, including Chase Manhattan (which is leasing 6,000 square feet at the corner of Fifth and 27th), have been locked in bidding wars for the space, paying upward of $250 a square foot in some locations.
Welles sees the new retail spaces being not-too-upscale for the neighborhood, with the area becoming mainly a shopping district for residents, rather than a destination shopping district like Flatiron.
The new residential units are anchored on the northern stretch of the neighborhood by 325 Fifth Avenue, a 50-story condominium building built by Douglaston Development at 32nd Street.
Richard Cantor, principal of Cantor Pecorella, is handling the marketing of the building’s residential units and three street-level retail spaces. Cantor’s retail marketing strategy has been aimed at bringing in high-end stores for the new residents.
“That neighborhood is a hot area for your traditional Downtown purchaser,” Cantor says, noting that the area is becoming an extension of Chelsea and Flatiron. “These are bankers and artists who want a hipper market.”
Still, the complete demographic segment of the new residential population has not been completely determined; no definite breakdown can be given between singles and families. Cantor noted that at 325 Fifth, he has seen a wide mix of singles, families and childless couples purchasing units.
Two of the three retail spaces in 325 Fifth have been rented out to a gourmet deli and a hair salon, each paying $150 a square foot. The retail chain 7-Eleven, which offered 25 percent over the asking price to move into the third space, was turned down for not fitting the image the building’s owners were looking for.
Cantor sees the third space going to a high-end retailer, most likely a service-related business.
Meanwhile, the decorating wholesalers who have long dominated this stretch of Fifth are beginning to relocate as they are priced out. Welles says many of them have begun to move east toward Madison Avenue and the various side streets, which have retail spaces renting out at prices more conducive to the wholesale decorating budget.
Industry watchers expect more street life in the future. “That part of Fifth at night was quiet,” says GVA Williams’ Breslin. “But now, with the new development and conversions around Madison Square Park, it will bring people into the neighborhood at night.”
Joshua Strauss, managing director for Robert K. Futterman & Associates, agrees. “That was an in-between market with a little bit of office, a little bit of residential and a little bit of hotel,” he says. Now, “it’s a very hot area, despite what the street looks like.”