SoHo Retail Investment Sales Rise as Rents Climb and Investors Swarm

SoHo’s been busy this year, especially in retail.

Investors have been flocking to the Manhattan enclave to buy up buildings thanks to the neighborhood’s attractive shopping corridors, higher rents and a seemingly full recovery from the COVID-19 pandemic.

“In SoHo, the traffic is almost limitless,” Jared Epstein, president of Aurora Capital Associates, told Commercial Observer. “Everyone wants to go there and shop there. There’s not a neighborhood in Manhattan that compares to it in terms of a retail district.”

During the first half of 2024, overall investment sales of properties in Manhattan reached $5.8 billion over 167 transactions, a 14 percent and 16 percent increase, respectively, from the second half of 2023, according to data from Ariel Property Advisors.

And much of those purchases have been for retail properties. Retail investment sales accounted for nearly 27 percent of all of Manhattan’s investment sales dollar volume in the first half of the year, higher than any other asset class, largely due to luxury retailers buying their own properties and significant acquisitions seen in recent months, Ariel found.

A lot of that activity was centered in SoHo. Year-to-date, there has been a total dollar volume of $259.8 million in investment sales in the neighborhood — $101.1 million of which was for retail properties, according to Ariel.

“Ultimately, [SoHo] is one of the hottest shopping and tourist destinations in the world, and this is reflective of that,” Ariel’s Michael Tortorici said. “High-demand retail areas of the city have bounced back, pricing has recovered, the institutional interest has recovered, and now it’s showing up in sales as well.”

And, with tourism back in full swing following the pandemic, people are spending more money in stores, meaning retail rents will grow and more building sales will follow, Tortorici added. Domestic tourism in the city is just 5 percent below its pre-2020 numbers, based on data through 2023, according to a report from the Real Estate Board of New York (REBNY).

Several major retail investment sales have closed in SoHo in just the past few months, including San Francisco-based Spear Street Capital’s $52 million purchase in September of the five-story luxury retail and office building at 446 Broadway from KPG Funds, as CO previously reported.

In October, Acadia Realty Trust picked up a retail condominium at 92 and 94 Greene Street from Continental Ventures for $44 million, CO reported. A 14,225-square-foot retail and residential building at 535 Broadway, which will soon be home to toy retailer Pop Mart, is also up for sale, according to Avison Young.

Smaller sales in SoHo didn’t go unnoticed, either. French skin care company Caudalie purchased retail space at 130 Greene Street for $9.8 million in September, according to city records and data from Ariel.

But not everything is sunny in SoHo as the neighborhood did see some distressed deals recently. The U.S. Bank National Association took over Thor Equities’ retail building at 440 Broadway for $8 million in August after it faced foreclosure on the property, while lender Bixby Bridge Capital gained control of the retail condo at 430 Broome Street for $10.5 million in October after it was foreclosed on, records show.

As more space gets eaten up and SoHo becomes that much more desirable to investors, rents will likely continue to rise. As of July, the average asking rent for retail space in SoHo was $481 per square foot, a 28 percent jump from $376 per square foot a year ago, according to a report from REBNY.

Not to mention, the neighborhood’s close proximity to tourist attractions such as the Whitney Museum of American Art, the High Line and Hudson River Park will always lure potential buyers.

“SoHo is attractive to investors given the relative low density of the neighborhood, which constricts supply,” said Bob Knakal, chairman and CEO of BKREA. “That, in combination with high tenant demand, is a great combination for investors.”

New York City’s overall retail sector is also on the “upswing,” Knakal said, because “rents have stopped going down, leasing activity is back up, and investor demand is back.”

In addition, retail is significantly further ahead of some other asset classes, such as office, in terms of recovering from the pandemic, a Newmark (NMRK) broker told CO. As a result, investors are being much more selective about where they’re purchasing retail and are seeking top shopping destinations, such as SoHo, the Meatpacking District, upper Fifth Avenue from East 50th to East 57th streets, and pockets of the Flatiron District.

The overall retail market in New York City — driven mainly by those main shopping corridors — recorded investment sales of $318.1 million in total dollar volume across 24 transactions during the third quarter of this year, representing increases of 22 percent and 100 percent, respectively, from the previous quarter, according to data from Avison Young.

It’s not just local investors dropping coins on SoHo buildings, as buyers from around the world are looking to invest in retail in the neighborhood.

For example, in October, London-based investment firm BNF Capital purchased Squire Investments’ retail and residential building at 43 Crosby Street for $20.8 million, CO reported. That same month, Spanish billionaire Isak Andic, the owner of fast-fashion brand Mango, paid $26.9 million for the retail property at 56 Crosby Street from Invesco Real Estate.

“If you’re someone overseas, you know there’s been a lot of buzz in SoHo,” Epstein said. “You have so many great tenants, so many great retailers, whether you’re looking for national brands or luxury international brands.”

Even through the pandemic, both luxury and mid-range brands in SoHo — ranging from Louis Vuitton and Dior to Forever 21 and Uniqlo — remained relatively stable and have now redesigned their stores to attract more tourists. A lot of those brands have established stores along Greene Street between Prince and Spring streets, which is arguably the hottest micro submarket within the SoHo shopping district.

“These global high streets are extremely supply constrained,” Newmark’s Brett Siegel told CO. “In these areas, there’s a limited number of storefronts where your tenants want to be. Investors see a tremendous value proposition in controlling those storefronts.”

SoHo isn’t the only retail market investors are eyeing in the city. Empire State Realty Trust (ESRT) made headlines this year along North Sixth Street in Williamsburg, Brooklyn — now a well-trafficked shopping destination after once being known as a gritty artist outpost.

Just in October, ESRT closed on $143 million of its previously announced $195 million in acquisitions of prime retail space along the Williamsburg corridor, where tenants such as Google, Warby Parker, The North Face and Nike have set up shop, as CO previously reported.

“It’s a great block,” Epstein said. “It has character, it’s in Williamsburg. There’s affluence all around there.”

As a whole, New York City’s retail sector seems to have shaken off the pain from the so-called retail apocalypse and COVID-19 to be in full recovery mode. Pricing in both leases and sales are on the upswing, and with the overall economy getting on more stable footing, more sales volume is going to follow.

“With an election soon to be behind us and an overall fairly solid national economic picture,” Tortorici said in late October, “it’s time New York City really experiences the recovery that it deserves.” 

Isabelle Durso can be reached at idurso@commercialobserver.com.