The UES is facing a retail vacancy epidemic
In the heart of retail’s “Gold Coast” on the Upper East Side, the space that once housed trendy dress shop BCBGMAXAZRIA collects dust. The retailer called the five-story townhouse home at 770 Madison Avenue for over a decade, but shut the doors in February amid a larger corporate bankruptcy. The landlord has yet to find a replacement.
Over on Lexington Avenue, there are four retail vacancies near the corner of East 85th Street. And on the 13-block stretch of 3rd Avenue between East 70th and 83rd streets, there are only two blocks that aren’t marred by at least one empty storefront.
Manhattan’s streets are awash with empty storefronts after retail asking rents climbed to untenable levels and tenants started to push back. But the sheer number of vacancies on the Upper East Side is alarming: The Real Deal counted 82 empty storefronts along Madison, Lexington, Third and Second avenues between 57th and 96th streets during an afternoon in late July.
“That is a lot, and there’s probably 20 percent more that’s on the market,” in terms of space that’s currently occupied and available for lease, said Greg Tannor, a retail specialist who left Cushman & Wakefield in April to join Lee & Associates as a principal.
Third Avenue between East 57th and 79th streets saw the biggest increase in its availability rate during the second quarter among the 11 retail corridors tracked by Cushman. The availability rate rose 7 percent year-over year to 16.6 percent, according to Cushman’s most recent retail report.
And Madison Avenue between East 57th and 72nd streets saw the second-highest increase: a 5.3 percent jump to an availability rate of 23.5 percent, which is the third highest among the corridors the brokerage tracks.
The forces at play are different among Upper East Side’s different retail corridors. Madison Avenue, for example, is one of the city’s premiere luxury shopping strips with asking rents to prove it (an average of $1,431 per square foot).
Over on Third Avenue, asking rents average $283 per square foot, and experts in the area said the avenue’s shops are geared more toward chain apparel stores and national brands due to the kinds of large retail spaces that line the avenue. The struggles faced by national retailers, therefore, are having more of an impact on storefronts on Third Avenue than they would on a tony strip like Madison, brokers said.
“Third [Avenue], I think, is the first market to really struggle with some of the difficulties we’re seeing with national soft goods retailers,” Cushman’s Steven Soutendijk said. “They’re the ones that are struggling in malls across the country.”
In recent months, for example, stores went empty at 1030 Third Avenue when American Apparel closed up one of its last shops following a bankruptcy auction earlier this year. And Reebok left behind and empty storefront at 1132 Third Avenue after shutting down its FitHub location.
By comparison, Second Avenue is considered more neighborhood-focused, geared toward service retail like dry cleaners and restaurants located in smaller stores where top-line rents are more manageable.
Beyond the general woes facing retail, the avenue was long impacted by construction along the Second Avenue subway line, which finally opened earlier this year.
“Certainly, now that the construction has completed, those vacancies should naturally have to fill in,” Winick Realty Group’s Kelly Gedinsky said. “They’re not obstructed by bridges over the sidewalk space anymore.”
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Winick Realty Group is one of New York’s prominent real estate firms specializing in retail leasing and advisory services. Over the years, Winick Realty has served a broad range of domestic and global clients, with a strong emphasis on long-term representation and expansion and growth strategies. Winick Realty Group is highly recognized as a forerunner in the retail real estate market.