NYC's Retail Revolution
New York City’s absurd residential rents are, unsurprisingly, matched only by New York City’s absurd retail rents. Exuberant costs are to be expected in the Big Apple. However, the current numbers are sure to make even the most seasoned Gotham locksmith or barber tremble with fear (or perhaps anger).The city has become progressively affluent in the last decade. Poorer families have been forced to relocate to the outer boroughs, and most took their businesses with them. Delis and bodegas have been replaced by oyster bars and vegan panini restaurants. Dive bars and gambling dens have been replaced by cocktail lounges and hip beer gardens. Barber shops and shoe shops are now boutiques and coffee houses. Wealthier residents have expensive tastes; these tastes are reflected in the shifting retail landscape.
In 2003, the average rent for retail space on Fifth Avenue was $1,500 per square foot. Now, it is $3,050 per square foot. In 2003, the average rent for retail space in SoHo was $300 per square foot. Now, it is $700 per square foot. Ralph Lauren recently signed a deal for 38,000 square feet on Fifth Avenue; Michael Kors recently signed a deal for 15,000 square feet in SoHo. Urban Outfitters and Joe Fresh opened massive stores ten blocks south of Fifth Avenue. H&M and the Gap opened massive stores in SoHo. Downtown has also seen an unprecedented retail boom since 9/11. Lower Broadway now boasts a Burberry, Michael Kors, Equinox, Hermes, and Ferragamo.
Brooklyn—a traditionally working class enclave—is experiencing ridiculous retail rents. In 2003, the average rent for retail space in Williamsburg was $50 per square foot. Now, it is $250 per square foot. In 2003, the average rent for retail space in Downtown Brooklyn was $100 per square foot. Now, it is $300 per square foot. Urban Outfitters will soon have a home on North Sixth Street in Williamsburg; Nordstrom Rack will soon have a home at the Fulton Street Mall in Downtown Brooklyn. Even Queens isn’t immune to the insanity. In Flushing, retail rents nearly doubled in the last decade, and a 700,000 square foot mega-mall was opened in the neighborhood in 2010.
Demographic changes aren’t solely responsible for the retail boom. The percentage of tourists in NYC has risen by an astonishing 38% in the last decade. And they like to shop—a lot. It is estimated that tourists will spend more than $37 billion in New York City this year (twice what they spent in 2003). “The foot traffic is incredible,” the executive chairman of retail at Douglas Elliman said of the tourists. NYC’s tourism surge is exemplified by Long Island City’s current hotel boom. Hotels are sprouting up all over the neighborhood, an expansion fueled by the tremendous demand for affordable lodging. It will be interesting to see if New York is able to maintain a distinct array of small, interesting businesses in the coming decades, or if it will simply become the ultimate American shopping mall.