by Catherine Curan
February, 05, 2008
http://ny.therealdeal.com/articles/8908
A row of denim-clad derrieres greets pedestrians thronging the corner of Broadway and West 44th Street. Advertising the new Levi's store under construction at 1501 Broadway, these cheeky pictures reference Times Square's seedy porn-shop past while heralding the area's big-brand future.
Levi's is only the latest mega-brand to debut on Broadway between 42nd Street and 46th Street, the heart of the district's increasingly upscale and expensive retail hub. The Levi's store sits two blocks south of 1551 Broadway, the former Howard Johnson's site snapped up by teen apparel chain American Eagle Outfitters last year in a blockbuster deal.
American Eagle is reportedly paying $20 million a year for 26,500 square feet of space and a 250-foot-high sign tower in development. That transaction helped pump up the area's average retail rent in a recent Real Estate Board of New York report: Broadway in the Times Square area logged a 107 percent gain to an average of $797 per square foot last year—the biggest retail rent increase in Manhattan.
"Times Square is hot," said Robin Abrams, executive vice president at Lansco. "This [American Eagle deal] is a new record for a unique property on a high-profile corner with potential for extreme visibility in the epicenter of everything."
Retailers have been paying up for a presence in Times Square because of a tectonic shift in the district's population. Thanks to more than 6 million square feet of office space constructed from 1996 to 2003, thousands of white-collar workers at firms such as Lehman Brothers are now weekday regulars at area shops and restaurants (see chart). Another 209,445 people will work in the area each year by 2010, according to Times Square Alliance forecasts.
Meanwhile, a slew of sleek boutique hotels, including Hotel Mela at 44th Street and Broadway, has sprung up, attracting well-heeled tourists and their shopping dollars.
A whopping 80 percent of foreign tourists who visit New York include a visit to Times Square, the Times Square Alliance estimated. Lastly, residential projects including the 464-unit Biltmore at 271 West 47th Street, where a two-bedroom rental is priced at $6,995 a month, have added thousands of upper-income residents.
"Most of what was on the radar five or 10 years ago was just domestic tourists," said Tim Tompkins, president of the Times Square Alliance. "[Now] there is a sense there is this untapped local market [with] increased foreign tourists, who are less price-sensitive than domestic tourists."
Growth in the area—and the eye-popping American Eagle deal—has some landlords seeking up to $1,000 a square foot for space in the high-traffic "bow tie," where Broadway and Seventh Avenue crisscross between 42nd and 47th streets. Roughly 88,000 people were counted on the sidewalk at Broadway and West 44th Street one day last August, according to one study.
As a result, landlords are aiming high, even for tiny spaces.
The recent asking rent for a 750-square-foot store in the Marriott Marquis, at the corner of West 45th Street, was $1,000 a square foot. Italian eyewear conglomerate Luxottica Group inked a deal for the space last fall and will open a Sunglass Hut store there this spring. Eric Gelber, senior vice president of CBRE, represented the chain, which already operates in the similar corridor of 34th Street. He said the chain was attracted to Times Square by a recent influx of big-name apparel stores including Ann Taylor Loft, which did a deal for a 19,000-square-foot store at West 42nd Street and Broadway in 2006.
Gelber wouldn't confirm whether Luxottica is paying the eye-popping $1,000-per-square foot asking rent, saying only, "[The rent] is high, but it's a small space."
Another bow-tie spot, 1540 Broadway, is also on the market with top-notch asking rent, according to sources. That address formerly housed gaming emporium Bar Code and is still home to a Virgin Megastore. The Virgin store is available with an asking rent of $800 per square foot for the 10,000-square-foot ground-floor portion, sources said. Vornado Realty Trust, which lists 1540 Broadway on its Web site under "available retail space," did not return a call for comment.
"If you need to be in the bow tie, it's very expensive," said Joshua Strauss, a managing director at Robert K. Futterman & Associates.
Such numbers may soon look a little too rich. Prancing models on billboards seem at odds with the news ticker at One Times Square—a site recently rented by Walgreens—which recently proclaimed, "Investors shy away from risk amid Citi loss, retail data; Dow down 201 points."
For now, tenant brokers and developers insist the district's triple-threat population surge will blunt the impact of an economic slowdown.
Fred Rosenberg, senior vice president of operations at Sherwood Equities, said interest is high for retail space in 2 Times Square at 47th Street, with an asking rent of $650 a foot.
"With the dollar so low against the euro … there are no signs of a slowdown," Rosenberg said.
1551 Broadway, the former Howard Johnson’s site, was snapped up by American Eagle Outfitters last year in a blockbuster deal.
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