The fallout over the credit crunch has made mortgages harder to get for some New York City homebuyers. And office leasing may be affected if Wall Street firms see their bottom lines drop. But what about the impact on New York City retail? Manhattan store rents have been climbing upward for almost a decade. Bank branches and drugstores jockey for position on what seems like every street corner. And the bar is continually reset for luxury retail, as evidenced by the current wave of jewelry stores invading Madison Avenue.
So is New York retail due for a fall? The Real Deal spoke to Faith Hope Consolo, chairman of retail leasing and sales at Prudential Douglas Elliman, about what’s next for Manhattan’s shopping scene as part of a recent Webcast interview.
One of the top retail brokers in the city — she brought the likes of Cartier, Jimmy Choo, Manolo Blahnik, Versace and others here — Consolo shared her thoughts on a retail “correction,” how we’ve become a city of foodies, and what to expect going forward in a shaky real estate market.
THE REAL DEAL: Though the overall economy seems mostly insulated from the subprime mortgage mess so far, there has been talk about a possible recession, and Wall Street bonuses will most likely be down this year. What implications does this have for consumer spending and its impact on the Manhattan retail scene?
FAITH HOPE CONSOLO: I really think the Manhattan retail scene is quite insulated, and I’m going to tell you why. Even if the Wall Street bonuses are down, they’re so exorbitant. We’ve seen that in the numbers for the last three years; there still will be a lot of money around for spending.
TRD: The brokerage Marcus & Millichap said in June — perhaps they agree with you — that New York continues to perform well because it’s favored by retailers who want all the heavy traffic by their doorstep, and they predict an increase in rents by 4.5 percent in 2007. In light of possible recent decreases in commercial office prices, would you say retail is not far behind?
FHC: Well, I think we might enjoy a little correction for retail. We’ve had eight years of retail rents going up. This year we’re at an all-time high across almost every neighborhood across the city, and I would like to see a little leveling off.
TRD: Can you give me a number? Some kind of estimate?
FHC: I’ll just tell you some of the rents; they’re kind of interesting. Fifth Avenue today, between Saks and Bergdorf, is at $1,700 a foot. The Financial District today, where there is the new luxe influx of retail, was $100 to $200 a foot last year; $500 a foot now.
TRD: So what are some of the trends you see in the retail market as of now?
FHC: Well, I think we’ve realized that food has become fashion. We’ve seen in the last three years more star chefs coming to Manhattan, more exciting restaurant venues, and we’ve seen the influx for Whole Foods and Trader Joe’s. So we’ve
really become a city of foodies.
TRD: Name some significant retail deals recently. And why are they significant?
FHC: I think that some of the very large jewelry deals on Madison are significant, and I’ll tell you why. This is the first time in a very long time that an area is completely defined by one use group. There are always a few stores, but in the last year we’ve seen 12 new jewelry stores, kind of like the Place Vend me in Paris, all grouped together.
TRD: Which neighborhoods would you say are most exposed if retail markets start to decline?
FHC: I think the neighborhoods that are still emerging and aren’t established: the Lower East Side, Alphabet City — any neighborhood on the fringe — lower West Side, maybe parts around Tribeca. They don’t have a real retail stronghold, and they’ll fall off the radar screen the quickest.