Rising retail rents are driving an ongoing acquisition frenzy in Soho, insiders say, and if the latest market data is to be believed, that activity should continue.
Average asking rents in Soho were $480 per square foot in the fourth quarter, nearly 53 percent higher than a year earlier. And another retail area just south showed a similar spurt. Street retail in Lower Manhattan, not including malls such as the World Trade Center or Brookfield Place, saw the average asking rent rise by more than 50 percent over the past year, to $319 per square foot. Those figures are from a report released this week by commercial services firm Cushman & Wakefield.
The sharp increase in Soho’s average asking rent was driven in part by heavy foot traffic and strong retail sales per square foot, but also by more abstract considerations.
“Some of the branding elements and the ‘gotta be there’ philosophy that you see in Times Square and on Fifth Avenue, has sort of bled down there,” said Gene Spiegelman, vice chairman and retail broker at Cushman.
On the other hand, average asking rents declined slightly on Third Avenue by just under 2 percent, to $259 per square foot, and in the central portion of Times Square, which fell by just over 3 percent, to $2,213 per foot.
Source: Cushman & Wakefield
The average asking rent can be deceiving, however, and may be quite different than actual deals. Sources provided The Real Deal with a list of comparable deals — known in the industry as comps — in Manhattan for the second half of 2013, which illustrated such discrepancies.
For example, Prada inked a deal in July paying $18.5 million per year to lease three selling floors and a mezzanine, plus office space, at Jeff Sutton and SL Green Realty’s 724 Fifth Avenue. Some put the rate at $4,000 per foot for the 4,140 square feet on the ground floor. Others assign more value to the other floors, pushing down the value of the ground floor to $3,658 per foot. Either way, it is a record, and far above the average asking rent.
The same goes for a record deal that Qatar-based luxury clothier Qela inked last fall at Thor Equities’ 680 Madison Avenue, where sources say it is paying $6.3 million per year. Depending on how the floors are counted, the lease can be $2,100 per foot for the ground floor (if the size is 2,736 square feet) or $1,760 per foot (using the frequently reported figure of about 3,000 square feet).
Another nearby comp was fashion retailer Agnona’s third-quarter lease at 823 Madison Avenue, for a total of 3,055 square feet, including 1,895 square feet on the ground floor, which sources put at $1,160 per square foot.
The discrepancy also shows in the Meatpacking District, where Cushman figures show average asking rent was $359 per square foot last quarter. Yet jeweler Doyle & Doyle inked a lease at 412 West 13th Street that sources said was for $225 per square foot on the ground floor.
Back in Soho, ground floor taking rent figures varied widely. For example, sport retailer Under Armour inked a deal for 20,144 square feet at 583 Broadway between Houston and Prince streets, where sources put the ground floor rent at $500 per square foot.
Just three blocks away, cosmetics store NARS inked a deal that brokers pegged at $1,111 per square foot for a 450-square-foot deal at 124 Prince Street, owned by Centurion Realty, Crown Acquisitions and Imperium Capital.