Discrepant Manhattan retail reports highlight lack of transparency

From left: Gene Spiegelman of Cushman & Wakefield, Peter Braus of landlord Sierra Realty

The Real Estate Board of New York is in its 10th year of publishing a bi-annual retail report covering Manhattan, and commercial firm Cushman & Wakefield has been putting out its own comprehensive report for years, yet the industry remains far less transparent than its commercial twin, office leasing, insiders say.

REBNY is expected to release its survey of 16 retail corridors and seven neighborhoods in Manhattan next week, a report first published in the fall of 2000 to combat what it considered inaccuracies in market data in news stories.

Last month, Cushman came out with its first-quarter 2010 detailed report on seven Manhattan corridors, and other firms such as CB Richard Ellis and CoStar Group, put out their own quarterly data.

While these reports provide general asking rent data, they pale in comparison to office reports which provide figures on effective rents, leasing volume and other details.

Real estate professionals familiar with the Manhattan retail market say it is far less transparent for a variety of reasons, including the lack of a dependable database such as CoStar to track the numbers. There is also an overall culture of secrecy supported by landlords, tenants and brokers.

“Retail in New York is as foggy as it seems. The secrecy helps the brokers, who like it because they get a jump on the competition,” said Patrick Breslin, president of retail at Grubb & Ellis New York, who echoed a widely held assessment of the market.

But even as the secretive ways of the retail market persist, some say the lack of information may harm tenants and landlords and slow deals.

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“In the absence of information there is the potential to ask, ‘Is this the best price?'” Michael Slattery, senior vice president of research at REBNY, said.

The central difference between the data available for the retail and the office markets is that CoStar, which is widely regarded as a dependable source of information on Manhattan office leasing, does not effectively track retail in New York City. The firm is not able to get enough leasing information from the city’s retail tenants, Dean Violagis, CoStar’s vice president of research, told The Real Deal.

Part of the challenge for his firm is that landlords often don’t want to provide the asking rent because different types of tenants, such as restaurants versus clothing stores, can command different amounts of money.

Brokers added that pricing for retail spaces is different from office because the supply is far more limited and the demand for each space is partly defined by the prospective tenant.

Gene Spiegelman, a retail broker and an executive director with Cushman, said retail was less of a commodity than office space where there are many more locations that would serve most tenants.

“Retail is not a fungible product. One corner is more valuable than another corner. Therefore it is very difficult to create an apples to apples comparison” between one retail location and another, Spiegelman said.

Another difference between the retail and office markets is retail is controlled by a much broader mix of landlords, brokers said, from plumbers to real estate giants like Vornado Realty Trust. The smaller owners are less inclined to share leasing data, and many deals are done with space that was never listed, further veiling the true market, insiders said.

Peter Braus, executive vice president of landlord Sierra Realty, explained that a chain-store tenant, for example, would not want its deals published. Because if a landlord knows a tenant paid above-market to secure another space, it hurts the tenant’s bargaining position going forward.

“Tenants don’t want the landlord to know that they did a deal where they paid more than the market,” Braus said.

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