Tulips, roses, T-shirts, beauty supplies, handbags, wigs, costume jewelry: You can buy them all in bulk in the flower and wholesale districts, the area encompassing the mid-20s mostly between Sixth Avenue and Broadway. But block by block, this area is slowly feeling the effects of gentrification; it’s uncertain how long the neighborhood will be a haven for the wholesalers.
Zoning has driven some of the current flux in the neighborhood. In 1995, Sixth Avenue — then mainly occupied by flower wholesalers, flea markets and parking lots — was rezoned to allow for residential buildings. Now, high-rise apartment buildings line the avenue from 24th to 28th streets, and more are planned for the blocks close to Herald Square.
Many of these buildings have retail space on the ground floor that is now partially occupied by the ubiquitous Duane Reade and Starbucks chains, but brokers are expecting more stores and restaurants for the spaces soon. They are also leasing space on the surrounding side streets, which have traditionally been occupied by clothing, jewelry and wig wholesalers, among others.
“People are living here now, and they have needs, and retailers recognize that,” said Ariel Schuster, senior managing director at Robert K. Futterman & Associates, which is managing the 19,000 square feet of retail space on the ground floor of the Chelsea Stratus condo at 735 Sixth Avenue.
The flower merchants have been the most visibly affected by the changes going on around them. As far back as the 1890s, flower wholesalers claimed the stretch of Sixth Avenue from 26th to 29th streets, and flourished there up until the 1970s, when some sellers began moving to the suburbs. The 1995 zoning changes further eroded the market, and now, most of the remaining merchants are squeezed onto 28th Street between Seventh Avenue and Broadway. Most of those who are still there are able to stay because they own their properties.
“I grew up here … I can remember when I was 8 years old, there were 40 or 50 wholesalers selling flowers, plants, artificial flowers, containers and greenery,” said Steve Rosenberg, owner of Superior Florists at 828 Sixth Avenue. “It’s a skeleton of what it once was. There are maybe 15 or 20 businesses left.”
He continued, “Probably close to half of the people that are left in the flower business in this neighborhood own their property, and that’s the main reason that we’re still here. We own the whole building.”
Flower wholesalers who rent their spaces under long-term leases are most likely paying anywhere from $25 to $40 a square foot — about 50 percent below current market rate — depending on the block they’re on, said Aaron Gavios, executive vice president and general partner of Square Foot Realty. “Going retail rates for that area range from $65 to $75 a square foot,” said Gavios. “Wholesalers can’t afford much because most are working on 10 to 15 percent profit margins.”
Efforts to find a new space to house the flower merchants have not panned out. In August 2005, the Flower Market Association, comprising about 45 merchants, signed a formal agreement hiring brokerage Cushman & Wakefield as its exclusive tenant representative. Robert Ballard, executive vice president at Cushman & Wakefield, said they found “the perfect space” for the group at East River Plaza, a retail mall under construction at 116th Street and the FDR Drive.
“This was the best of 52 different sites, and far and away the most suitable site they saw,” said Ballard. “It was deemed operationally perfect for them. Parking is on the same level as the retail floor, so customers can drive up to their floor from the garage adjoining the mall, go in, get a cart, go from dealer to dealer and return to their truck.” The merchants are currently serviced by 18-wheeler trucks that park on 28th Street from 1 to 5 a.m., and parking is scarce in the neighborhood.
Ultimately, the florists could not agree about the move. Some who owned their buildings were concerned about selling them, and “tension developed between those who owned and those who leased,” said Ballard. “There will always be a space for them to consolidate into; we have sites in the South Bronx and Long Island City. But they have always been skeptical that their customers would want to drive out of Manhattan and go back in.”
New kinds of stores
Meanwhile, new retailers are sprouting up on the side streets among the remaining florists and other wholesalers who are scattered throughout the West 20s. Two restaurants — Hill Country and Black Pearl — opened on West 26th Street between Sixth Avenue and Broadway this past year, joining several bars and lounges already on the block. One wholesaler remains across the street from Black Pearl. A Sheraton and a Holiday Inn Express opened on West 29th and West 25th streets, respectively.
Lighting stores Lightforms and White Furniture, both on West 26th between Sixth and Seventh avenues, have been on the block about a year, and a children’s furniture store, Schneider’s, opened recently on West 25th Street off Sixth Avenue.
“It used to be just a few lounges on 26th, plus the display wholesalers,” said Leslie Spira Lopez, president and CEO of Kew Management Corporation, which owns and manages several buildings in the area. “But now new retail, like the children’s furniture store, is coming in to service the residential buildings on Sixth Avenue.”
While plenty of wholesale merchants still exist on both the side streets and on Broadway from 26th to 31st streets, many have had to shift their locations due to a combination of rising rents and shrinking available space on blocks that were once hubs for these types of businesses.
“The main corridor was 29th Street, and many of those people have been there 10 years or longer,” said Spira Lopez, adding that rents on that block tend to be almost as high as those on Broadway, which range from $120 to $160 a square foot. “But there is now spillover onto 28th and 27th streets to get lower rents.” (Most wholesale shops off Broadway pay $25 to $30 per square foot.)
The appeal of having wholesalers as tenants, said some brokers, is also waning as the character of the neighborhood changes. “Wholesalers used to be landlords’ only choice in that neighborhood,” said Gavios, “but now it’s a landlord’s market in the retail business, and they’re finding that that type of tenant doesn’t really help the neighborhood or add value to the building, and they’re often not financially stable.” Added to that negative perception has been a crackdown on wholesalers selling counterfeit goods in the area.
Crackdown
In 2004, police seized $12 million in counterfeit goods from a warehouse at 27th and Broadway, and police now regularly patrol Broadway to monitor what is being sold. Though the majority of shops here are conducting business legally, the illegal activity has cast a pall.
For the moment, though, the wholesale district — particularly the stretch on Broadway — is still bustling, and vacant spaces are hard to come by. “The wholesalers are holding out,” said Jason Pennington, a senior advisor at Sperry Van Ness/Butler Kane. “I tried helping a high-end wholesaler find space recently, but it was impossible. We looked in the general area, and there were no vacancies or direct deals available,” Pennington said. “They thought about subletting space, but most were too small, and they ended up taking second-floor space from a friend.”
Figuring out if and when space is available is also tricky, according to some brokers.
“The landlords rent the space to the next person before they’re vacant, so there’s never a ‘for rent’ sign,” said Mike Kaback, associate broker at Midtown Commercial Real Estate. “Plus, there’s often more than one tenant inside one store. One guy sells electric radios; another sells feather boas, all in one entranceway. One guy rents the whole thing, and they sublet to the other folks.”
“The wholesalers are entrenched,” said Spira Lopez, but changes are inevitably coming to the area, and not just from the Sixth Avenue side. The growing popularity of the Madison Square Historic District as a retail and residential area — and projects like the conversion of the Gift Building at 26th and Fifth, and plans for a new restaurant nearby on Fifth Avenue between 27th and 28th streets — are signs, she said, that “people are looking to service a whole new community.”
Speaking of 1123 and 1133 Broadway, two buildings that her firm owns and manages, both of which house wholesalers, Spira Lopez said, “I’m reluctant to give long leases at 1123 and 1133 because I know the area is going to change, but those tenants are willing to keep paying higher rents because they want to be near the wholesale district.”