It's a Tenant's Market Now

-March/April 2009

W. 14th St., Ports 1961 at 3 Ninth Ave. and Vince at the corner of Washington and Little W. 12th streets. In Soho, NYC Timberland opened at 474 Broadway and Madwell and 478 Broadway, while Escada has plans for 550 Broadway, replacing Ann Taylor.

But perhaps Consolo's most intriguing potential revelation may show up in Union Square, as speculation increases over what will fill the large spaces left behind by the Virgin Megastore and Circuit City. A super Best Buy may take on of the big-box spaces, and even Wal-Mart was floated as a possibility.

Until this year, electronics were seen as safe among the retail community. For example, Heritage Realty president and CEO George Constantin says his company had bought 420 Fifth Ave. in 2004. At that time, electronics giant CompUSA occupied around 68,000 square feet of the building's space. He says the location was CompUSA's number one grossing store.

The space has been vacant since CompUSA ceased operations early last year, and Constantin is looking for someone to take it. So far, he's been getting interest from smaller tenants.

"We had entered a deal with Fortunoff, but they filed bankruptcy." Constantin says, adding that he and his partners are hesitant about dividing the space. "Where can you find 74,000 square feet in big blocks on Fifth Avenue? My dream tenants would be a Dell or an Apple." He says he's met with a few people from Microsoft as well, noting that the computer maker is looking to expand into retail.

Constantin calls retailers with service oriented or high quality products the magic formula. He says that many higher-priced retailers are realizing that consumers are willing to travel to destination areas form some of their products.
Then there are staple products that consumers always need and tend to purchase in locations more convenient for them. "People still have to eat, shower and shampoo their hair," says Podell, senior director at C&W. "Products like makeup, small items like lipstick – items that women can take with them are not huge investments-are still selling."

Still, some retailers that carry the necessaries like soap are seeking the formula that gives them an edge as they compete for the lipstick and shampoo market. Take the New York institution Duane Read. "We were told that Duane Reade was staring a new concept or prototype store," says Fred Posniak, senior vice president at W&M Properties.

Thanks to new management, Duane Reade has been slowly rolling out new, more spacious, neater and modern stores replete with a new more upscale appearing logo. With W&M, "They wanted to do a multi-level branch with us with the total area around 14,000 square feet," says Posniak.

The retail space at 1350 Broadway was split, with Sovereign Bank taking a corner in the building and Duane Reade the rest. "It has a nice presence on the ground, and there will be an escalator and elevator going up to the second floor, which will overlook Herald Square." Posniak says.

The Duane Read deal may reflect the times. "Some of the best leases were done in slow economics," Posniak says, "if you are looking for long-term, now is the time to be leasing, because rents are obviously down."