FAO Schwarz lists retail space in GM Building
Meanwhile, Soho store rents continue surge as vacancy rates climb: Cushman
The fabled toy store FAO Schwarz placed its flagship retail space in the GM Building, owned by Boston Properties along with investors including Chinese billionaire Zhang Xin, on the sublease market, an executive at the commercial brokerage Cushman & Wakefield said at a media briefing this morning.The store, owned by retailer Toys “R” Us, is a longtime tenant on the 58th Street side of 767 Fifth Avenue, in the same building as the Apple store’s iconic glass cube.
The space includes 10,000 square feet on the ground floor; 30,000 square feet on the second floor; 11,954 on the lower level; and 9,106 square feet in a sub cellar, the CBRE listing reveals. (No word on whether FAO Schwarz will throw in the giant floor piano.)
The FAO Schwarz lease runs through 2017, according to Kathleen Waugh, a spokesperson for Toys “R” Us.
“Over the next four years, we will evaluate our lease renewal options. FAO Schwarz has long been a must-see destination in the Big Apple,” Waugh said in a statement. “We remain committed to bringing the magical experience the store is known for to the children from all over the world who visit it every day.”
It was not immediately known what the asking rent was or when it would be available. CBRE declined to comment.
Cushman retail broker and executive director Alan Schmerzler noted the listing in the firm’s third quarter breakfast briefing in Midtown this morning.
CBRE Group agents Susan Kurland, an executive vice president, and Victoria Oliva, an associate, sent out the listing on behalf of FAO Schwarz earlier this week.
Boston Properties has another retail space in the building on offer. Formerly occupied by media giant CBS, it is located on the 59th Street side of the property.
FAO Schwarz renewed its lease at the building in 2011 after a period of speculation that it would leave when its lease expired in 2012.
Elsewhere in the retail landscape, Soho edged out Times Square for the neighborhood with the most vacant retail space, according to Cushman, which tracks 10 Manhattan markets.
Soho had 452,125 square feet of vacant space, or 9.8 percent of the market. Next was Times Square, with 411,769 square feet or 27.7 percent, followed by Lower Manhattan, with 270,278 square feet, or 10.2 percent, the Cushman figures showed.
Despite the high availability, rents in those markets continued to climb, Schmerzler noted.
“The law of supply and demand does not necessarily apply in retail,” he said during the briefing.
Over the past year, ground floor average asking rents in Soho have surged the most among the 10 trade areas, up 59.5 percent to $469 per square foot last quarter, from $294 per foot one year earlier, Cushman data showed.
A number of the city’s top retail investors have targeted the Soho market, including Jeff Sutton; Joe Sitt, CEO of Thor Equities; and Bobby Cayre, head of Aurora Capital Associates, who have all partnered on 529 Broadway. Other firms such as Madison Capital want to add more high-end space to the market.
Schmerzler told The Real Deal he did not think the large amount of space would lead landlords into a war to lower rents.
“There is enough [tenant] demand,” Schmerzler said.
David Zar, a partner at Zar Property NY, which owns property in Soho, agreed.
“Most landlords in Soho are well capitalized and will wait as long as it takes to land the right tenant and rent,” he said.
Others noted prices are rising in part because tenants are pushing to get in the area.
“Soho remains one of the most desirable locations for retailers, and most landlords in the neighborhood are inundated with offers for retail space in their properties, many times well before spaces are available,” Jared Epstein, vice president at Aurora Capital, said.
In addition to retail, Cushman reported that Manhattan’s office vacancy rate rose last quarter even as asking rents rose as well. (Cassidy Turley reported this week that leasing activity was strong in Manhattan.)
The total vacancy rate climbed last quarter to 10.6 percent, up from 10.4 percent in the prior quarter, the Cushman data showed. Asking rents ticked up as well, reaching $62.51 per square foot, up from $61.81 per foot in the second quarter.
Cushman’s Ronald Lo Russo, president of the tri-state region, said the office leasing market was performing better than those figures suggested.
“By all measures we are on track to have a very good year,” he said, adding that he expected to see more than 24 million square feet of new leasing, an annual level that is considered healthy.