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Following An Evolving Retail Scene In New York City
New York City, one of the world’s premier shopping destinations is about to get over one and a half million square feet of new retail space. Some will be delivered to Long Island City, an area that has been waiting for a retail resurgence for over 2 decades, and more will be constructed as part of a planned development dubbed “Hudson Yards” on the far west side of Manhattan. How will this influx of retail square footage affect the retail landscape, especially with uncharacteristically high vacancy rates in prime retail corridors in Manhattan?
Long Island City has long awaited attention from retailers – its distinct lack of stores is a problem for the area. When Citigroup built the tallest building in Queens at 1 Court Square in 1989, the building was hailed as the start of a new era. Common thinking was that the new tower would kickstart development, which would mean retail. Even as more offices and residential towers are built, a commensurate increase in retail has not followed.
Maybe the lack of retail growth in Long Island City stems from the fact that there wasn’t much retail to begin because Long Island City was traditionally an industrial neighborhood. Since retail attracts more retail, it is hard to get it if you don’t have it. Additionally, when you bring retail to a “pre-existing” area, zoning changes, vacancy rates, demographics, and tenant mix are dealt with over time and each play an integral role in the type of space that will become available and the type of tenant that will be attracted to the area.
Whatever the reason, a new dawn may be approaching for retail in Long Island City. Long Island City has the infrastructure it needs to support retail, multifamily development in Long Island City is outpacing the rest of the nation with approximately 22,000 new residential units planned, and more than 465,000 square feet of retail development is anticipated by 2020. As fitness, medical and educational tenants are filling up vacant retail spaces, there is a sentiment that these “first wave tenants” are a sign that restaurants and big box stores are sure to follow, and residents appear to be ready for the next wave of retail. In a survey of 1,300 Long Island City residents, restaurants, pharmacies, and grocery stores were identified as top retail needs for the neighborhood.
Unlike Long Island City, Hudson Yards, a 28-acre mega-development on the far west side of Manhattan was planned from day one to be a “mini city”. The area will have the residential, office, and schools that Long Island City has, but this “mini city” is planned with retail as an integral part of the design. Factors such as tenant mix, access, and demographics were carefully curated from day one giving retailers a certain comfort that they will have a sufficient customer base.
Hudson Yards will be home to a retail area dubbed “The Shops & Restaurants at Hudson Yards” and will house Neiman Marcus’ first New York City Location. It is scheduled to open in late 2018, and already over half of the 1,000,000 square feet of retail is leased. Although the tenant mix is not complete, 20 percent will be luxury retailers, with mid luxury, fast casual, and restaurants – some by well-known restaurateurs, rounding out the mix.
It will be interesting to see how the retail scene in New York City evolves over the next 3-5 years, since as of the end of 2017 vacancy rates on in prime retail corridors remained high – 24.3% on Fifth Avenue between 49thand 60thStreet, and 21.9% in Soho, well above the 5% “healthy rate”. Will The Shops & Restaurants at Hudson Yards become a more compelling venue for retailers traditionally housed on Fifth Avenue, Madison Avenue, and Soho? Will the influx of residents to Long Island City and Hudson Yards help boost retail throughout New York City? Will Long Island City retail finally have its moment?
Cristina L. Addy is an Associate in the firm's Real Estate group. Her practice focuses on representing investors, developers, and lenders in connection with the acquisition, disposition, and financing of office, multifamily and retail properties. Cristina also has extensive experience representing tenants and landlords in office, retail, and industrial leasing transactions.
Prior to joining Goulston and Storrs, Cristina was an associate at an Am Law Top 50 U.S. law firm.