PRINT THIS STORY:

CHANGE TEXT SIZE:

POSH RETAILERS VENTURE BEYOND MANHATTAN’S FIFTH AVENUE

By Donna Mitchell

Madison Avenue might be luxury retailers’ favorite venue in Manhattan, but as fashion companies compete for prime shop space on the island, other neighborhoods are proving to be solid alternatives to, and stiff competition for, the posh midtown street, say local retail watchers.

Retailers in the borough’s SoHo district, which suffered business losses after the terrorist attack on Sept. 11, 2001, have since rebounded. And some big-name fashion retailers such as Stella McCartney have settled in the meatpacking district, attracted by rents of $175 per square foot, says Faith Hope Consolo, chairman of Prudential Douglas Elliman’s retail leasing and sales division. Another Lower Manhattan neighborhood, NoLita (north of Little Italy), has attracted clothing retailer Calypso, among others. Consolo was one of several panelists at a November luncheon sponsored by the Association of Real Estate Women.

Even the Bowery district, which has long had a seedy reputation, will eventually draw high-end retailers when the booming condominium market there attracts well-heeled residents to its bars and restaurants, says Consolo.

Fashion’s steady march through the farthest reaches of Manhattan will continue, and retailers remain undeterred by rents as high as $1,800 per square foot per year for luxury retailers, says Consolo. Foreign retailers will also sustain demand for high-profile Manhattan space as they seek to penetrate the U.S. market with flagship stores.

“Fashion is defined by change, and every year someone that we’ve never heard of before is deciding to come to the U.S.,” said Michael Ratner, chairman of Maspeth, N.Y.-based builder Richter+Ratner Contracting Corp.

Other affluent markets, such as California’s Orange County, do not provide the concentration of choice venues for top foreign retailers, says Ratner. If they want to open stores in those markets, they are largely limited to such malls as South Coast Plaza, in Costa Mesa, Calif.

Italian companies show the most interest in opening stores in Manhattan, followed by French, English, Spanish and German merchants. Eventually, Chinese retailers will step in, Ratner predicts.

Foreign retailers face a distinct learning curve when doing business in Manhattan, the panelists say. “The challenge is to get them to understand our cultural differences,” said Ratner, noting that many foreign retailers have a penchant for buying their real estate, rather than leasing space.

Drugstores are another burgeoning segment of the retail market in Manhattan, owing to heavy pedestrian traffic all over the island, panelists say. But these crowded sidewalks don’t always justify the high rents being charged, says Al Callegari, regional director of real estate at Woonsocket, R.I.-based CVS Corp., explaining that pharmacy sales, not walk-ins, account for 70 percent of all business.

“We can generally afford $130 to $150 per square foot in rent,” said Callegari. “Above that, it is hard to make our economy work.”