Gritty Neighborhood Is Looking Better to Retailers
New York Times
By John Holusha
Published October 13, 2002
THE search for affordable rents has driven small independent retailers to unlikely parts of the city, such as the meatpacking district around 14th Street on the far western part of Manhattan and NoLIta, the northern part of Little Italy, east of Lafayette Street between Houston and Canal Streets.
Now, according to real estate executives, attention is shifting to a part of the old Lower East Side, east of Little Italy, beyond Sara D. Roosevelt Park, between Houston and Delancey Streets. Much of the housing in the once famously crowded area has been rehabilitated and is attracting single, well-educated, well-paid residents who are replacing the immigrant families who formerly dominated the area.
This, in turn, is attracting operators of restaurants, bars and coffee and tea shops, which attract both residents and people from other parts of the city who are drawn to the gritty, urban scene. In addition, some clothing designers have opened shops, and art galleries can be found among the small grocery stores and hardware shops that are still very much in evidence.
"The Lower East Side was one of those places that was never going to change because it was dangerous and all that," said Christine Emery, a director with the Lansco Corporation, which specializes in retail property. "But the fact is that it has changed. The area comes alive at night with a young crowd in the cafes and restaurants."
Shoppers can still find a second-hand dress or accessory along Orchard Street, long known as a destination for bargain hunters. But now it is called "vintage clothing," and the bargains might not be as good.
Rents for ground-floor retail spaces in the area have risen over the last few years, but still are a bargain compared with nearby shopping areas. "Rents were as low as $15 to $20 a square foot"annually, said Alan Victor, an executive vice president of Lansco. "They are up to $40 to $50 a square foot now, but that is one-half to one-third of anywhere else."
Faith H. Consolo, vice chairman of Garrick-Aug, another retail-oriented brokerage, said: "That area was always a shopping neighborhood. Now it is becoming a seven-day neighborhood and that is attractive to retailers."
Ms. Consolo said some retailers are being squeezed out of NoLIta to the west. "The rents in NoLIta are in the $200 a square foot range," she said. And in SoHo, to the west of NoLIta, the annual rents are about $300 a square foot, although down from their peak of about $450 a square foot, Ms. Consolo added.
Some of the shops displaying fashion rather than vintage clothing are operated by young designers seeking recognition for their work that might eventually result in big orders from large retail chains, Ms. Emery said. "Young women designers need to get their names out, so they have to have a retail presence," she said.
Because the neighborhood is still in transition, these designer retailers do not have to build out their stores to the level of sophistication that would be required in more established parts of town, Ms. Emery said, which is a big attraction for people operating on slender budgets. "They can do a store here for $30,000 to $40,000 compared to $250,000 in SoHo and $150,000 in NoLIta," Ms. Emery said.
BECAUSE of the way the housing units over them were originally built, some retail spaces are less that ideal, and shoppers have to climb or descend steps to enter a store. "If you have to step down into a store, it usually means that it has less value than one at street level," Mr. Victor said. "But down here people think it is cool."
Just as retailers are attracted by rents lower than most other places in Manhattan, so are residents. "The Lower East Side is known as a place where you can get an apartment for a reasonable amount of money," said Benjamin Fox, a partner in Newmark New Spectrum Retail, a brokerage firm. "Living there is an extension of the urban lifestyle, which is attractive to young people."
Indeed, one real estate office was offering studio apartments for $1,100 a month and $1,550 for one-bedrooms, relatively modest for Manhattan.
Although they are less likely to be concerned about rent levels than other New Yorkers, some investment industry executives have been moving into the area, Ms. Consolo said, because of its proximity to the financial district at the southern tip of Manhattan. "Some Wall Street types have been taking apartments in the area because of the commute," she said. "They are mostly singles; you don't see too many families."
She said the area was attracting upscale residents because much of the housing stock has been improved. "The residential has been renovated and the area is starting to look like the meatpacking district," she said, referring to an area near the far western end of 14th Street, where Greenwich Village meets Chelsea, where renovated and new housing sits adjacent to industrial property.
Robert Futterman of Robert K. Futterman Associates, a retail brokerage, said he had not noticed a high level of interest in the Lower East Side on the part of store owners, but said the area has potential, both as a place to shop and to live. "It is one of the last areas for growth in the city, and there are a lot of vacant lots ready for development." Since most new residential buildings have retail space on the ground floor, there is the opportunity for new stores as the properties are developed.
One advantage the area has over NoLIta is that the existing buildings are bigger, so the stores can be larger than the compact boutiques that characterize the neighborhood immediately to the west. Although some fashion stores are taking advantage of these spaces, restaurants are prime candidates for many properties, real estate executives say.
THE highest and best use of space there is still for restaurants," said Beth R. Greenwald, a broker with Newmark New Spectrum, who said she did a lot of business in NoLIta as it developed and has been bargain hunting along Orchard Street and others on the Lower East Side since she was a child.
"The restaurants are always the first wave" as a neighborhood redevelops, Ms. Emery said. She said the restaurants attract people seeking a different dining experience to the area, which starts making it a more attractive place to live. "The second-hand stores come later," she added.
Ms. Greenwald said the retail transformation will probably take longer in the Lower East Side
than it took in NoLIta. "The transformation is not complete like NoLIta, and gentrification
will take longer because of all the existing stores."
But, she said, as landlords realize they can get more rent from a restaurant or fashion shop than a bodega, the area will be transformed. "Little by little, the leases will roll over and things will change," she said.
Noting that the rapidly developing Clinton Street flows into Avenue B of the East Village, uniting the two neighborhoods across Houston Street, Mr. Victor said, "People are not afraid to walk across Houston any more."