Seven years of bad retail leasing luck ended last month when River Place I, the massive apartment complex at West 42nd Street and 12th Avenue, filled its commercial space, striking the property from an unofficial roster of sites that can’t seem to find (or retain) tenants.
Lucky Strike Lanes, a national chain of “bowling lounges,” will occupy the 40,000 square feet of retail space that sat empty even as the 908,000 square feet of residential space filled up and River Place’s 921 apartments found residents.
Seven years of bad retail leasing luck ended last month when River Place I, the massive apartment complex at West 42nd Street and 12th Avenue, filled its commercial space, striking the property from an unofficial roster of sites that can’t seem to find (or retain) tenants.
Lucky Strike Lanes, a national chain of “bowling lounges,” will occupy the 40,000 square feet of retail space that sat empty even as the 908,000 square feet of residential space filled up and River Place’s 921 apartments found residents.
The lease is a surprise spare for the property, which was built in 2000 and reached full residential occupancy in 2003. For seven years, finding a retail tenant seemed difficult, if not impossible.
The fact that a mogul as savvy as Larry Silverstein, the developer of River Place I, endured years without a retail tenant raises the question about what makes some locations work and others not work – and whether there is such a thing as “cursed” or “jinxed” real estate, even in a market as hot as New York.
Space that isn’t generating revenue is failing to do so for a reason, said Chase Welles, senior vice president of Northwest Atlantic Real Estate, a company that specializes in tenant representation.
“I don’t believe in jinxed spaces,” Welles said. “I strongly believe that when you examine these long-term vacancies, there’s always a reason. There’s a wacky landlord or a physical problem with the space.”
Physical problems at a location, the proximity to other retail and leasing costs relative to a particular neighborhood are among the most common reasons why retail spaces remain vacant, brokers said.
But some brokers are leery of speaking ill of specific spaces – what they name as a competitor’s unrentable space today could become their own commission-draining albatross tomorrow.
That doesn’t mean that a bad reputation is easy to shake. The distinctive office building at 9 West 57th Street, set between Fifth and Sixth avenues, and featuring a sleek, sloping façade, was completed in 1974.
The tower was an early success for developer Sheldon Solow, but only at higher altitudes. Attempts to convert the lower level to retail faltered for decades.
Finally in 2000, the restaurant Brasserie 8½ stepped in, following the conversion of two escalators in the building’s original design to a large curved staircase.
“It’s a great place for a company party, but eating there is another story,” said Benjamin Fox, president of Winick Realty. “The space has these exacting standards to fill.”
However, Fox said that vacancies have most to do with location. “It takes time for a neighborhood to catch up with the retail it was created for.”
Mark Kapnick, managing director of RKF & Associates, said a confluence of factors usually makes a space undesirable. He recalled an office building at 622 Third Avenue, near 41st Street, which was originally designed with a ground-floor loading dock.
When the building’s landlord, Cohen Bros. Realty, converted the ground floor to retail-friendly space, a construction team battled plumbing issues caused by the raised floor created for the dock area.
Pop-up patches
Another reason for protracted vacancies is a space’s track record, and that’s led to a quick fix solution: the so-called “pop-up” lease, a short-term use of space often done to support a brand or product launch.
“Once a few concepts fail in a space, other prospective tenants become wary about the location,” said Robin Abrams, executive vice president of Lansco Corp.
That could explain why a prime locale like 101 West 57th Street, at the northwest corner of 57th Street and Sixth Avenue, known as the Buckingham retail space, has trouble supporting a long-term tenant. Wolf’s Deli’s 25-year tenure ended in the late 1990s after building owner Steven Shapiro evicted it in a rent dispute.
The latest tenant, “pop-up” leaser Delta Air Lines, had no intention of staying for long and limited its tenancy to six weeks this winter. The Delta Sky 360 lounge touted the virtues of its lie-flat seats for its long-haul flights to an affluent Midtown clientele.
Waiting for the “right” tenant may have advantages for landlords. As well-capitalized companies such as Chase Bank and Apple take on an increasing number of locations in Manhattan, they have driven rents upward, seemingly creating an environment in which landlords would rather wait to get their desired high rents and leave a space vacant.
“One of the main reasons space stays unrented,” said Kapnick, “is because landlords feel they will get their number. And more often than not there’s always some retailer that steps up and pays it.”
Lucky Strike Entertainment’s 40,000-square-foot deal may be an example of a slow roll to success.
The Hollywood-headquartered company plans to convert the Silverstein Properties space into an entertainment complex it hopes to open by autumn. President Dolf Berle said Lucky Strike will feature bowling lanes with automatic scoring, a lounge area with food and Lucky Strike Luxe, a private party area with VIP lanes.
With pricey condos – including the Atelier at 635 West 42nd– rising nearby, it could be that Silverstein’s seven-year vacancy was a formula for delayed – but lucrative – gratification.
Just add time
Sometimes, the “curse” is being ahead of the curve. Silverstein raised eyebrows when he bought the land for River Place in 1980, and other developers and retailers have also had lean times before their visions have been realized. That’s particularly true of retail and nightlife areas in the Meatpacking District, on the Lower East Side, and even specific blocks of the perennially trendy West Village.
“New York is really full of small pockets of very dense real estate, but those pockets have specific boundaries,” said Abrams of Lansco Corp. “Once you’re out of the boundaries, the retail should be much lower.”
She said a small corridor on Bleecker Street between Charles and Perry streets turned around about five years ago when designer Marc Jacobs opened a store there. It quickly became an “anchor” for the once-retail bereft area, which now includes high-end designers such as Tommy Hilfiger, Ralph Lauren, L’Uomo and Brunello Cucinelli.
The Meatpacking District was for decades an industrial area marked by warehouses and the smell of offal where properties were owned by a handful of cautious landlords.
“This area owes a lot to the McNally Brothers of Pastis fame,” said Kapnick. “I once asked them how they knew this would be the hottest destination in Manhattan. Brian McNally turned to me and said, ‘It was the only place we could afford at the time. There was no plan!’ Go figure!”
A similar transformation is in the works on the Lower East Side, especially on the Bowery near East Houston. Over the past two decades, the neighborhood hasn’t lacked foot traffic, but high-end builders and retailers nonetheless ignored it due to its seedy reputation.
In this case, money speaks volumes, even for an area with a rough past. The AvalonBay condominium complex is actively leasing, and a new Whole Foods at 95 East Houston, occupying two floors and 87,000 square feet, has quickly become a downtown shopper’s paradise.
The cultural scene is shifting, too: Landmark’s Sunshine Cinema is one of the neighborhood’s anchors, and the New Museum of Contemporary Art, at 235 Bowery, recently opened its doors just blocks from where flophouses and bordellos once thrived.