Downtown Manhattan, Uptown Chic
Al Barbarino Oct. 15, 2013, 9 a.m.
Burberry. Salvatore Ferragamo. Ermenegildo Zegna. Michael Kors. Scoop. Hermes. Judith & Charles. Calypso St. Barth.
It’s an impressive list of retailers. What’s more striking is that Brookfield Office Properties cut deals with all of them this year, and they’ll be sharing a home at the revamped Brookfield Place beginning next year, forming an unprecedented shopping destination Downtown.
“These spaces will flow like they never did before,” said Ed Hogan, the firm’s leasing director, as he shuffled through a sawdust-laden floor in a towering interior space that will become a two-floor haven for the elite lineup.
But it’s no mall. Upon completion, Brookfield Place will feel more like a neighborhood, Mr. Hogan said. He walks to the west-facing edge of the space and lifts a curtain covering a large exterior window, pointing eagerly to a waterfront plaza along the Hudson River that will become a 10,000-square-foot outdoor dining area for Le District, a French eatery.
One day soon, as they did long ago, Mr. Hogan envisions barges pulling up to the harbor, hauling fresh produce for use within Le District, which will feature a 25,000-square-foot indoor marketplace that, with its various chef-inspired dining options, could ultimately be viewed as Downtown’s response to Eataly.
Underneath its eight million square feet of office space, and in addition to its high-end dealers, which often find comfort in numbers, Brookfield Place will include a long list of quick-service eateries, sit-down dining options and a 35,000-square-foot Equinox gym.
Italian menswear store Ermenegildo Zegna was the latest of the high-end shops to join, signing a 10-year, 3,550-square-foot deal for a two-story store that will feature a 40-foot-tall glass façade on the north side of a new glass-cube atrium entrance on West Street, which will provide street and underground access to the World Trade Center.
When the retail complex reopens in the fall of 2014, after the completion of a $250 million renovation that repurposes its 250,000 square feet of space, it will give rise to a retail lineup that may never have seemed viable—if even imaginable—at any point in Downtown’s history.
“The names on that list would never have come Downtown 10 years ago,” said Brookfield’s David Cheikin, who heads up the firm’s Lower Manhattan strategy.
But some hope that with the rise of Brookfield Place’s new lineup—as well as the retail slated for the new World Trade Center site, where Westfield is rumored to be in talks with its own share of luxury retailers—more high-end brands will flow into Downtown’s other corridors, which are already seeing rent increases and high demand.
That growth has been pushed along by the ongoing rebirth of Downtown, where millions of square feet of new commercial space is coming online, tourism continues to boom and a new demographic of New Yorker moves in, amid a population that has doubled over the last decade to 60,000. Also, the new Calatrava and Fulton transportation hubs have emerged as a critical support for the growth.
“Luxury’s time has come in Lower Manhattan,” said Alan Schmerzler, an executive director of retail services with Cushman & Wakefield. “There’s a young, sophisticated, educated and well-paid demographic, so there’s justification and rationale for luxury.”
Data from Downtown Alliance shows that of Lower Manhattan’s more than 60,000 residents living in 31,000 housing units, 26 percent are single adults with an average annual income of $130,000, 33 percent are young couples with a household income of $228,000, and families, which represent 27 percent, have a household income of $252,000.
Tourism, another major boon, is on pace to log another record-breaking year after 52 million visitors helped to create $55.3 billion in economic impact last year. Data from the Downtown Alliance shows in 2002 there were just four million visitors to Lower Manhattan’s events, museums and attractions, but by last year the number of unique visitors to the submarket had risen to 11.5 million, helped in no small part by the success of the 9/11 Memorial as a new tourist destination.
The office market is keeping pace, as the older building stock is more than ever sought as a value alternative to Midtown South and as new Class A products rivals those seen uptown. The market recorded nearly one million square feet of positive absorption in the third quarter, as Downtown shaped up as viable alternative for the next wave of tech and creative companies, particularly after the groundbreaking entry of big-timer Conde Naste, which will anchor One World Trade Center.
“There’s a lot going on Downtown that shows it is stronger and better today than it ever was,” said Douglas Elliman’s Faith Hope Consolo, when she reflected on the 9/11 anniversary last month. “I was very cautious in watching what would happen with all the new buildings and the changes, but it has really matured and I have a lot of confidence in Downtown.”
Average retail rents will only rise, with ground-floor rents in Lower Manhattan (Broadway, Wall Street and Fulton Street) already up 29.4 percent year-after-year to $277 per square foot, behind only the Flatiron District, the Meatpacking District and Soho, according to third-quarter data from Cushman & Wakefield.
“Clearly new buildings with strong, high-end retail, combined with the completion of the memorial and the museum, will attract a lot of additional foot traffic,” said Ken McCarthy, chief economist at Cushman & Wakefield, in an interview last month. “And the highest-priced corridors in Manhattan are those that have the most foot traffic.”
Brookfield and most likely Westfield will show that high-end retail has a place downtown, as the higher-end names mix in with kids clothing and home-furnishing stores that were absent a decade ago, as well as old favorites such as Century 21 and J&R Music and Computer World.
There is hope that the wealth will spread, and the Broadway corridor, for example, is already shining, with notable deals in the third quarter Downtown including Urban Outfitters’ 20,900 square feet at 180 Broadway, City Sports’ 10,000 square feet at 50 Broadway and TD Ameritrade’s nearly 10,000-square-foot deal at 100 Broadway.
As of spring 2013, average retail rents along the Lower Broadway corridor were up more than two-and-a-half times the 2001 rents, and up 26 percent from 2011, according to data from the Real Estate Board of New York.
Meanwhile, “The upper section of Broadway is really where you are seeing premium asking rents and you will see retailers who want to be Downtown, who simply can’t fit at Brookfield or the World Trade Center, looking there,” Mr. Schmerzler said. “The foot traffic on Broadway is spectacular.”
Still, Mr. Schmerzler and others doubt that Broadway will achieve quite the level of luxury retail, in terms of quality and quantity, as that seen at Brookfield Place. And Wall Street, despite select high-end retail – Tiffany & Co., Hermes, BMW, Tourbillon – is still viewed by some as the high-end corridor that never was.
If you walk along prime Fifth Avenue, the ground floor of its elite jewelry shops is often reserved for the most expensive items, while the second floor houses the cheaper items, said Joanne Podell, a vice chairman at Cushman & Wakefield, noting that the opposite is true at Tiffany’s on Wall Street.
“That speaks to who is walking in,” said Ms. Podell, who is marketing space at 23 Wall Street.
But, she added, there is extremely low availability and high demand Downtown, meaning that change will come, even if it’s a few years off. And others, like Mr. Hogan, cling to the idea that the emergence of luxury retail in clusters will more quickly spread its wealth.
“Retailers like company, and the tide is going to lift all the ships,” he said.
- 1 World Trade Center
- Alan Schmerzler
- brookfield office properties
- Brookfield Place
- Calypso St. Barth
- Conde Naste
- Cushman & Wakefield
- Downtown Alliance
- Downtown Mnhattan
- Ed Hogan
- Ermenegildo Zegna
- Faith Hope Consolo
- Joanne Podell
- Judith & Charles
- Le District
- Michael Kors
- New York Harbor
- Salvatore Ferragamo