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 move out.

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 & Wakefield.

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 Retail.

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 Arden B.

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 tenants."