The Flatiron Building may be a grand old lady of New York City real estate, but that’s not who shops near the Manhattan icon.
In the rush to capture those young buyers, rents in the area have increased 25 to 50 percent over the past 18 months.
The retail renewal on the once-nondescript stretch began back in 1987, when Paul Smith moved in at 108 Fifth Avenue, putting the high-fashion British clothier in a building that held a shoe store, a deli and a Chinese restaurant.
The latest turn for the Fifth Avenue corridor from 14th to 23rd streets began post-Sept. 11, when stores like Searle and Club Monaco began joining such established fashion retailers as J. Crew, Kenneth Cole, Eileen Fisher, Emporio Armani, The Gap, Signal, Daffy’s and others to capitalize on “Fashionable Flatiron” and the low commercial rents in a neighborhood thought to be on the way up.
Now brokers say the district is becoming even more youth-oriented, with the newest crop of fashion and fast-fashion retailers: American Apparel, which recently opened another one of its T-shirt meccas on 19th Street’s northwest corner; White House/Black Market, a purveyor of black and white women’s apparel; and Juicy Couture, known for its sweats and other casual wear.
Zara, Bebe, and soon-to-come BCBG and H & M also speak to this affordable fashion trend.
“Flatiron offers great seven-day-a-week shopping with great residential and office — whether it’s advertising agencies, publicists or architecture firms,” said Faith Hope Consolo, head of retail leasing at Prudential Douglas Elliman. “And they all love to shop and they’re all younger shoppers.”
The hottest retail section is from 15th to 21st streets, Consolo said. Shoppers are fed into the area from Union Square, Sixth Avenue’s big box retailers like Bed Bath & Beyond and anchor stores on Broadway such as ABC Carpet and Paragon Sports.
Add in convenient access to bus and subway lines, close proximity to the bustling Park Avenue restaurant scene and a growing residential presence and it’s no wonder that rents are running as high as $325 per square foot.
Vacancy is practically nil, say retail brokers, and, not surprisingly, the rush for space has increased rents. Even side street locations (see below) are running upwards of $150 per square foot for smaller storefronts, said broker Ariel Schuster, managing director at Robert K. Futterman & Associates.
This increase doesn’t portend a trend towards more luxury-oriented brands, la Madison Avenue or Upper Fifth Avenue, but comes in recognition of the district’s high volume of foot traffic, said Joanne Podell, a senior vice president at Cushman & Wakefield.
“If a retailer is doing a roll-out now, Flatiron becomes a consideration,” Podell said. “It has the density to justify the rents.”
Indeed, fast-growing retail chains such as White House/Black Market and Juicy Couture selected Flatiron locations for their first stores in New York City.
By the same turn, the high rents are creating a mall-like homogeneity.
“The only thing interesting about the street is the Flatiron Building,” quipped Podell.
Perhaps no other recent retail move embodies the shifting climate as much as the arrival at 111 Fifth Avenue of fast-fashion king H & M and its displacement of the discount apparel shop Daffy’s, which had been in that location at the corner of 18th Street for 20 years.
Forced out by rising rents on the 40,000-square-foot site, Daffy’s nevertheless chose to relocate to a smaller locale on the side street abutting H & M’s more prominent Fifth Avenue frontage.
“They’re going behind and next to a competitor, and that tells me there’s big bucks in the neighborhood,” said Henry Goldfarb, head of the retail department at Grubb & Ellis.
Schuster, who helped craft the newly reconfigured store and represented both Daffy’s and the landlord, sounded equally sanguine and gave credit to Daffy’s practical approach.
“It’s a good indication of how smart Daffy’s is because they’re not intimidated by having an 18th Street address. They know their customer base and so they can go on the side street and still do the volume.”
Even fashionistas need to eat, drink
Food and fashion go hand-in-hand like fine wine and cheese. No wonder, then, that bakeries, tapas bars and an upscale spirits purveyor have sprouted up on the side streets of the Flatiron District — once thought of as a Death Valley locale devoid of great retail potential.
Indeed, putting a store between Fifth and Sixth avenues on blocks such as 18th and 19th streets cuts against conventional wisdom. But retailers who have forgone setting up shop along a main thoroughfare may in fact see good business largely owing to their ideal position between Union Square-area stores like ABC Carpet and Sixth Avenue’s big box retailers.
Recently opened Bottlerocket Wine & Spirit at 5 West 19th Street is the latest to jump in the mix, positioning itself across from the soon-to-open Jade, a 57-unit condo conversion named after designer and rock-star spawn Jade Jagger, which may help further inject the street with a monied, jet-set crowd.
“We picked this location specifically because of its mix,” said Bottlerocket’s owner Tom Geniesse, referring to the street’s attractive crosscurrent of affluent residents, out-of-town shoppers and creative office community types.
As for the rents, Geniesse would only say that he’s paying below $100 a square foot for the 3,200-square-foot location whose lease he entered into in the fall of 2005.
“I shopped all over the city and I have a good sense of comparables,” he said. “It may have been cheap at one point but it’s not now.”
Because of the area’s increasing 24-hour-a-day status, these locations are now better suited to attract new destination retailers, said Henry Goldfarb, head of the retail department at Grubb & Ellis.
In this environment, Goldfarb said, the side street retailers are open for longer hours and can afford to pay higher rents. Residential conversions whose ground-floor spaces bring additional side street retail, usually of a caliber matching the building’s upscale cachet, may help send up rents further.
Still, expect the side streets to remain focused on service retail and not start sprouting the exciting fashion retail found on the avenues. “It would take a multitude of retailers coming in to turn these cross streets [between Fifth and Sixth avenues] and because of their length and industrial feel, I don’t see it happening,” Goldfarb said.
Some of the transitions seen on the side streets of the Flatiron District, meanwhile, are occurring north of 23rd Street as well.
The nondescript importers and wholesalers selling everything from bathroom fixtures to cookware seem a world away from “Fashionable Flatiron.”
Yet on 24th, 25th and 26th streets, brand-name tenants are beginning to move in, spurred on by residential conversions, and staying open later, said broker Jim Buslik, a principal with Adams & Co.
In recent years, Buslik has assisted in a number of retail deals, including rapper Jay-Z’s 40/40 Club at 6 West 25th Street, New York Kitchen and Bath’s retail showroom at 8 West 25th Street and Thai 212, a restaurant at 30 West 24th Street occupying roughly 4,000 square feet of ground-floor retail space.
Still, the long, narrow blocks remain forbidding, and the merging roadway where Broadway and Fifth Avenue abut Madison Square Park is less than inviting for pedestrians who want to promenade and window shop. The 40/40 Club, for example, deadens the block it’s on, with its dark, opaque windows creating a fortress-like atmosphere.
Nevertheless, Buslik is optimistic.
“I think eventually, after the Toy Center goes residential, things will change,” he said. “There’s a chance it [Fashionable Flatiron] may jump over 23rd.”