Still Seeking Best Mix of Style and Rents
By Terry Pristin
Published on April 2, 2003
Albert Laboz was on the verge of leasing his two-story building at 454
West Broadway in SoHo to a high-fashion retailer when terrorists
destroyed the World Trade Center. The deal never closed.
The terms would have been so sweet — more than $300 a square foot
annually for the ground floor — that Mr. Laboz, a principal in United
American Land, had paid his existing tenant, a Rizzoli bookstore, to
Mr. Laboz eventually found a new tenant, Barry Kieselstein-Cord, an
accessories company that sells belts priced from $900 to $2,200. But
there was a catch: Kieselstein-Cord's rent was tied to its sales volume.
After 18 months, if the store reached its sales goal — an amount that
neither tenant nor landlord would disclose — the rent would be fixed at
about 20 percent below the 2001 asking price, said the company's broker,
Candice Dobbs, president of Dobbs Associates.
The Kieselstein-Cord deal is unusual, but it reflects the changes that
have rocked the SoHo retail market. The ground-floor retail vacancy rate
for SoHo is about 14 percent, or twice the average for Manhattan,
according to a mid-February survey by the brokerage company Cushman
Five years ago, luxury retailers began replacing the art galleries that
had fled to Chelsea because of rising rents. But SoHo as Madison Avenue
South proved to be a short-lived trend. Yves St. Laurent, Cartier and
Ermenegildo Zegna are among the uptown retailers that leased space in
SoHo but occupied it only briefly or never moved in. Last month, the
jeweler H. Stern abandoned plans to open a store in a new building at
Prince and Mercer Streets.
SoHo suffered more than most other Manhattan retail districts from the
repercussions of the Sept. 11 attack, the absence of foreign tourists
and the economic downturn. But brokers also say that rents soared out of
control for a neighborhood that did not stand a chance of drawing the
quantity of affluent customers found on Madison Avenue. "Some of the
stores that opened didn't have any business going down there," said
Jeffrey D. Roseman, an executive vice president of Newmark New Spectrum
With for-rent signs dotting the cast-iron buildings that were once used
for light manufacturing, some landlords are negotiating month-to-month
or short-term leases while they wait for the market to improve. Gene P.
Spiegelman, a senior director at Cushman & Wakefield, said that
asking rents in the most desirable part of SoHo, from Broadway to West
Broadway and from Houston Street to Grand Street, have declined to an
average of $166 a square foot annually from $191 at the height of the
market in early 2001. The highest asking rent, he said, has declined to
$333 a square foot from $470. Fifty-seven retail spaces are now
available, compared with 46 in early 2001, he said.
Brokers see SoHo as two retail districts. Broadway has chain stores that
can be found in many malls (with a few exceptions, like Prada and its
minimalist shop). A new Crate & Barrel store serves as the northern
anchor, and Bloomingdale's plans to build its second Manhattan store in
the Canal Jeans building to the south. H&M, a trendy but inexpensive
clothing retailer, has leased space at 515 Broadway, only steps away
from its store at 558 Broadway. Other new retailers include Levi's and
West of Broadway, boutiques catering to young customers are taking space
that was prepared in flusher times for marquee retailers. Recent
arrivals representing well-known brands like Apple Computer, which moved
into a former post office at Prince and Greene Streets, and Adidas, at
142 Wooster Street, have departed from their usual format to take
advantage of the neighborhood's distinctive architecture.
New stores offering contemporary furniture and home furnishings are
being added, particularly at the southern edge of the neighborhood,
where rents are $75 to $90 a square foot, said Caroline P. Banker, an
executive vice president at Douglas Elliman. Kartell, one of SoHo's
first furniture retailers, is turning over its 1,800-square-foot space
at 45 Greene Street to Catherine Memmi, a French home furnishings store,
and moving into 3,500 square feet at 37 Greene Street.
Other new tenants nearby include Flou, a bed and bedding store, and
Zollavari, which sells rugs made by nomadic tribes in Iran. At the
northern edge of SoHo, Design Within Reach, a company that began as a
catalog and Internet retailer of sleek home furnishings, opened its
first New York retail store on Saturday at 142 Wooster Street.
Brokers who specialize in SoHo say their phones are ringing more often
now that warmer weather is making the streets livelier. But most say
rents should come down more. "The asking prices are still high," said
Bruce Sinder, the president of the Sinvin Realty Corporation, which
represents both landlords and tenants. "If the price is right, there are