Manhattan Retail MarketM I D - 1 S T Q U A R T E R 2 0 1 7 R E P O R T

P.2PPPP2P.2P.2P.2.2222Sources: https://rebny.com/content/dam/rebny/Documents/PDF/News/Research/Retail%20Reports/REBNY_Manhattan_Retail_Report_Fall_2016.pdf

Real Estate Board of New York’s Fall 2016 Retail Report

The report released in November by REBNY revealed that average asking rents for available ground level retail space as of October 15 declined in 11 of the 17 major retailed corridors surveyed amidst an increasing supply of retail inventory and a slower retail sales environment. While the state of the economy and retail demand have attributed to the decline in asking rents, longer delays in decision-making by retailers in a high-asking rent environment has also begun to push prices lower as they become more cost-conscious in an effort to increase profi tability. Those retailers looking to relocate will reportedly “sacrifi ce larger store size and wider frontage for ideal placement in a corridor that most effectively refl ects their brand.”

The corridors profi led in REBNY’s report represent Manhattan’s top tier retail corridors, and the asking rents quoted refl ective of available ground level space. It has been furthered pointed out that asking rents are signifi cantly affected by numerous attributes such as location (street/avenue), frontage, ceiling heights, and volume of space availability; and that rents on adjoining side streets may lease for considerable less that the locations profi led.

However some industry people point out that the retail business mood in New York City has reportedly gone from “hesitant to confi dent” as signs of “certainty” reportedly return to the city’s retail marketplace. Factors attributing to a more optimistic tone include the anticipation of a new president and building owners becoming “more fl exible with leasing terms because there are fewer tenants in the market, in part because a strong dollar has dampened foreigners’ shopping at area retailers.” Reacting to tenants’ hesitancy to sign deals, rents are lowering and landlords are more willing to do physical work and offer longer free rent prompting tenants “looking at the market for 2 or 3 years” to fi nally make deals according to the report. Lower Manhattan is currently the “most vibrant submarket” in terms of leasing activity, but the Times Square area is seeing an uptick in part due to the widening of pedestrian plazas that is reportedly prompting people to linger longer in the area.

Corridor Fall 2016Avg. Asking

Fall 2016Asking Range

Fall 2015Avg. Asking

% Yr-over-YrChange

% ChangeSpring 2016

Eastside

Madison Ave: 57th – 72nd Sts $1,433 $780-$2,200 $1,613 -11% -13%

Third Ave: 60th – 72nd Sts $340 $160-$550 $335 2% -8%

East 86th St: Lexington-2nd Aves $428 $250-$800 $430 -1% -6%

Westside

Broadway: 72nd – 86th Sts $341 $200-$500 $361 -6% -5%

Columbus Ave: 66th – 79th Sts 403 $247-$528 $375 8% -1%

Midtown

East 57th St: 5th – Park Aves $1,438 $1,200-$1,750 $1,600 -10% -12%

Fifth Ave: 42nd – 49th Sts $1,259 $1,000-$2,500 $1,203 5% -8%

Fifth Ave: 49th – 59th Sts $3,484 $2,700-$4,450 $3,397 3% 3%

Broadway & 7th Ave: 42nd – 47th Sts $2,170 $1,950-$2,350 $2,390 -9% -8%

Herald Square

West 34th St: 5th – 7th Aves $745 $391-$1,000 $836 -11% -16%

Flatiron

Fifth Ave: 14th – 23rd Sts $390 $300-$480 $394 -1% 1%

Broadway: 14th – 23rd Sts $390 $350-$430 $510 -23% -13%

SoHo

Broadway: Houston – Broome Sts $755 $500-$1,667 $831 -9% -8%

West Village

Bleecker St: 7th Ave South – Houston St $471 $325-$655 $468 1% -8%

Meatpacking

14th St: 9th – 10th Aves $345 $275-$450 $372 -7% -1%

FiDi

Broadway: Battery Park – Chambers St $369 $178-$700 $308 20% 13%

Harlem

125th St: Hudson – East Rivers $125 $65-$279 $132 -5% -9%

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A report released in December by the New York City-based policy institute revealed a year-over-year increase of 1.2% in the number of national-brand store locations throughout New York City, representing a moderate improvement over the 1% gain in 2015. National chain stores have steadily increased their presence in the city over that past 8 years, adding 89 locations in 2016 to bring the total to 7,243 stores among the 303 retailers listed in CUF’s analysis — Manhattan, 2,715; Brooklyn, 1,544; Queens, 1,643; Bronx, 893; and Staten Island, 421. Dunkin Donuts continued to lead the way for the 8th consecutive year, increasing its year-over-year locations by 24 stores; followed by Subway whose New York City presence diminished by 12 stores in 2016.

The 10 largest National Retailers in New York City

Year-over-Year Snapshot

By Borough

Among the city’s roster of national retailers, the largest year-over-year expansions included:

Center for an Urban Future – State of the Chains, 2016

Sources: https://nycfuture.org/pdf/State_of_the_Chains_2016_fi nal.pdf

National Retailer 2016 Stores 2015 Stores National Retailer 2016 Stores 2015 Stores

Dunkin Donuts 596 572 T-Mobile 223 225

Subway 433 445 Baskin Robbins 217 214

MetroPCS 326 323 McDonald’s 217 232

Starbucks 317 305 Rite Aid 185 188

Duane Reade/Walgreens 303 307 CVS 153 137

National Retailer Expansion Total Stores2016/2015

National Retailer Expansion Total Stores2016/2015

Dollar Tree 630% 73 / 10 Popeye’s 10% 90 / 82

Crunch 44% 23 / 16 Domino’s Pizza 8% 79 / 73

Sprint 27% 89 / 70 Dunkin Donuts 4% 596 / 572

Family Dollar 18% 79 / 67 Starbucks 4% 317 / 305

CVS 12% 153 / 137 7-Eleven 4% 142 / 137

National Retailer 2016 Stores Manhattan Brooklyn Queens Bronx Staten Island

Dunkin Donuts 596 157 138 179 85 37

Subway 433 141 91 118 58 25

MetroPCS 326 48 111 88 65 14

Starbucks 317 223 34 40 11 9

Duane Reade/Walgreens 303 160 54 51 21 17

T-Mobile 223 49 59 72 37 6

Baskin Robbins 217 51 57 75 21 13

McDonald’s 217 62 50 55 42 8

Rite Aid 185 32 54 58 38 3

CVS 153 44 26 52 13 18

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National Retailer Reduction Total Stores2016/2015

National Retailer Reduction Total Stores2016/2015

Tim Horton’s -50% 5 / 10 Staples -10% 44 / 49

Nine West -45% 6 / 11 Foot Locker -10% 45 / 50

Aerosoles -39% 14 / 23 GameStop -8% 70 / 76

The Children’s Place -21% 30 / 38 McDonald’s -6% 217 / 232

FedEx -10% 60 / 67 Subway -3% 433 / 445

Manhattan Brooklyn Queens Bronx Staten Island

Starbucks (223) Dunkin Donuts (138) Dunkin Donuts (179) Dunkin Donuts (85) Dunkin Donuts (37)

Duane Reade/Walgreens (160) MetroPCS (111) Subway (118) MetroPCS (65) Subway (25)

Dunkin Donuts (157) Subway (91) MetroPCS (88) Subway (58) CVS (18)

Subway (141) T-Mobile (59) Baskin-Robbins (75) McDonald’s (42) Duane Reade/Walgreens (17)

McDonald’s (62) Baskin-Robbins (57) T-Mobile (72) Rite Aid (38) MetroPCS (14)

FedEx Offi ce (53) Rite Aid & Duane Reade/Walgreens (54 ea)

Rite Aid (58) T-Mobile (37) Baskin-Robbins (13)

GNC (52) McDonald’s (50) McDonald’s (55) Family Dollar (23) 7-Eleven (10)

Baskin Robbins / Chipotle (51 ea) Payless (35) CVS (52) Baskin Robbins &Duane Reade / Walgreens (21 ea)

Starbucks (9)

T-Mobile (49) Starbucks (34) Duane Reade / Walgreens (51)

Popeye’s (19) McDonald’s, Sleepy’s, Carvel (8 ea)

MetroPCS (48) Popeye’s (33) 7-Eleven (47) Payless, Burger King,Dollar Tree (18 ea)

Burger King (7)

Center for an Urban Future (cont’d)

While the Bronx, Brooklyn, Queens and Staten Island enjoyed gains, Manhattan saw a lowering of national chain stores. The city’s northernmost borough the Bronx boasted the highest percentage of increase for a year-over-year growth of 4.2% in 2016, followed by Staten Island’s 3.7%; Brooklyn’s 2.3%; and a 1.6% increase in Queens. In contrast, Manhattan incurred a nominal decrease of national brand stores by just shy of 1% year-over-year.

National chains that signifi cantly reduced their footprint in the city, but still maintain a presence included:

Top 10 National Retailers in Each Borough

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Museum Stores Take on a Fresh Look

In an effort to boost sales at the retail outlets operated by some of the city’s museums, the selection of merchandise being sold is beng re-evaluated while also refreshing the look of the stores themselves — some which have become outdated over the years. In addition, museum retailers are shifting away from “cliché trinkets for a mix of unusual items at every price point;” and a larger selection of merchandise that is distinctive and really refl ects their institutions.

Metropolitan Museum of Art – Sales revenue has decreased sharply, retail operations ran at a reported $2.1 million defi cit in 2015 despite a record 6.7 million visitors. The museum has revamped displays, brought back bestsellers, and increased inventory of basic items typically sought by visitors such as posters that are keyed to current exhibits which has led to the re-launch of 20 posters. Store displays have been revamped to “showcase a more inviting range of items” with an increased inventory of rugs and textiles piled up to create a bazaar-like feeling. Looking ahead, the Met plans to bring in new merchants and designers, create a men’s gift line and offer consumer art supplies.

Whitney Museum of American Art – The museum’s relocation to its new facility in the Meatpacking District in 2015 offered the ideal opportunity to revamp its retail operations. The former “book bar” that gave visitors limited access to titles has now evolved into an open-plan, 40-foot-long browsable book wall within the glass-walled lobby of the museum. In addition, the larger retail area allows for the display of a broader range of merchandise to attract the wider range of people that now visit the museum. The Whitney has also teamed up with some artists to offer a selection of limited-edition items; as well as scheduling events such as book signings intended to animate the space during both the day and the night. Looking ahead, the museum plans to create a distinctive online portal.

Museum of Modern Art – The recently renovated MoMA Design Store located on West 53rd Street that reopened in the fall features a more fl exible, open layout. Modular fi xtures display a mix of merchandise ranging from jewelry to clothing, plus a selection of high-end electronics have reportedly become a major push for the store. The launch of new products now has an increased monthly frequency versus the store’s previous rate of twice per year. Additional sales revenue is successfully being generated from the growing licensed store at 81 Spring Street, “shop-in-shops” operations in Japan, and product-licensing arrangements like its arts-based apparel line with Uniqlo according to reports.

Developing Trends

Sources: http://www.wsj.com/articles/museums-rethink-retail-exhibits-1480988149

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Single-Item Businesses Deliver Proven Benefi ts

Although the concept on one-product shops and restaurants is not new in New York City with several familiar businesses such as bagel, pizza, coffee, cheese and hamburger existing for many years, it has taken on a new spin with a broader array of entrants. Turning full circle, the popularity of specialty shops in the city is once again generating an increase in consumer appeal. Some sources point out that concepts which are likely to achieve the highest level of success in New York City are those that are not seasonal, can be eaten at many points in the day, or served as comfort foods.

While the concept of focusing all efforts on a single product can be seen as somewhat risky, from a business perspective it offers some benefi ts such as narrowing the “focus on the labor skill set which impacts your labor costs,” minimizing space requirements which are typically smaller for the production of one product, creating better purchasing power due to increased quantities of fewer items, as well as adding branding benefi ts if the business provides a unique consumer experience according to some industry people. However, the concept is not without challenges as artisan companies compete with larger chains such as Whole Foods Market which also offers a more selective array of items on a broader scale; and while a single one-product store may achieve success, it doesn’t guarantee survival of additional locations. In today’s highly competitive and uncertain retail market it is anticipated that many new single-product makers will look towards sharing space in order to make ends meet.

• La Maison Maille – The Unilever-owned 267-year old brand that offers 35 varieties of mustard opened a fl agship store at 927 Broadway (Flatiron) in April, preceded by a 1,137-square-foot store with 637-square-foot at grade at 185 Columbus Avenue (Upper West Side) which is currently being offered as a sublease.

• Chobani – The yogurt brand opened a 525-square-foot café at 152 Prince Street on the corner of West Broadway in 2012, more recently opening a 1,314-square-foot outpost within the new Target Store that opened in October at 255 Greenwich Street in Lower Manhattan.

• Kellogg’s NYC – The national cereal chain opened its fi rst permanent café in July at 1600 Broadway (Times Square); and has recently extended its initial one year lease for the 1,650-square-foot space another year due to positive public response. To bolster sales the store also promotes brand merchandise, has a catering business, and hosts birthday parties.

• Heatonist – The purveyor of hot sauce condiments opened in Brooklyn’s Williamsburg neighborhood at 121 Wythe Avenue in 2015. The retailer boasts 150 varieties of hot sauce, plus a curated selection of gourmet hot sauces from small-batch makers. Only 250 square feet of the 1,100-square-foot store serves as the retail area, including a tasting bar.

• Melt Shop – The retailer offering a selection of grilled cheese sandwiches currently has 4 Manhattan locations according to its website.

• Vive la Crêpe – The creperie launched in 2009 by the MYT Group offers about 2-dozen crepe variations from savory to sweet; and is currently operating several locations in New York City.

Developing Trends (cont’d)

P.7PPPP7P.7P.7P.7.777Sources: http://rew-online.com/2016/11/08/hip-ho-hall-of-fame-museum-hotel-manhattan/ • http://ny.curbed.com/2016/11/9/13573240/hip-hop-hall-of-fame-manhattan-nyc

Today’s New Breed of “Cross-branded” Hotels

Although the launching of hotels by product and service companies is not a new trend, the concept has been gaining popularity amongst some new retail chain entrants. Although these types of lifestyle-branded hotels tend to excel, having a good hotel operator is reportedly crucial to achieve expectations; and while branding helps start a customer base, it is not enough to generate hotel-stays by travelers. The hospitality sector has become an opportune avenue for retail chains seeking to expand their brand without over-saturating the market with too many stores. Luxury fashion and accessories brands Armani and Louis Vitton currently have eponymously-branded hotels in Dubai and Milano, and Europe and the Caribbean respectively. The co-founder of the popular Hard Rock Café debuted the fi rst Hard Rock Hotel in Las Vegas in 1995, a number that has grown to 23 hotels located around the globe. More recently:

• Baccarat Hotel & Residences – The crystal-maker opened its fl agship luxury hotel last year in the new 46-story condo-hotel development in Midtown’s Plaza district at 20-28 West 53rd Street. A 68-unit residential component sits atop the 114-key hotel.

• Virgin Hotel – The former music and video megastore brand while be opening at 1205-1225 Broadway in Midtown South’s NoMad neighborhood. The 38-story, 465-key hotel development broke ground last year and expected to be completed in 2019.

• Hard Rock Hotel – The music-themed brand will be making its debut in New York City within Midtown’s former “Music Row” corridor. The 445-key hotel to be constructed at 153-161 West 48th Street will host live music events featuring “museum-like displays of music memorabilia on its walls,” live rooftop performances, and an upscale, underground speakeasy. The Times Square development that is tentatively slated to deliver in 2019 has yet to break ground.

• Equinox – The upscale fi tness gym with 82 locations globally will be opening a 200-key hotel at 35 Hudson Yards on the Far West Side. The move to enter the hospitality market reportedly came after results of a survey of the chain’s “hundreds of thousands of members” across over 80 fi tness clubs worldwide introducing the hotel idea returned a 95% interest in staying at an Equinox hotel. The company is reportedly planning to open 50 hotels around the globe over the next few years. The 223-key hotel will span the 15th through 29th fl oors at the 70-story tower that has already broken ground, featuring a 60,000-square-foot fl agship Equinox health club at its base.

• Restoration Hardware – The hardware and home furnishings chain leased the entire 5-story, 26,661-square-foot building at 53-61 Gansevoort Street last year with plans to debut its fi rst boutique hotel in Midtown South’s Meatpacking District. The hotel that will be located one-block south of the retailer’s new fl agship store at 9-19 Ninth Avenue is expected to have 14 guest rooms which will in part serve as a showroom with all the rooms featuring the retailer’s furniture and fi xtures.

• West Elm Hotel – The Brooklyn-bred furniture retailer with 93-stores internationally has partnered with hospitality management company DDK for the company’s recently launched hospitality brand. The hotels will be designed, furnished and marketed by West Elm. The room designs will be refl ective of the hotel’s location, with local art work displayed. The Williams-Sonoma subsidiary will debut its fi rst 2 hotels in Detroit, MI and Savannah GA in late 2018.

• Hip Hop Hall of Fame Museum & Hotel Building – Non-profi t Hip Hop Hall of Fame (HHHOF) known for developing and producing the fi rst ever Hip Hop Hall of Fame Awards TV Show as an annual fundraising vehicle to build and maintain The Hip Hop Hall of Fame Museum has reportedly revealed plans to develop a hybrid project that will host a museum, TV studios, sports bar, restaurant, concert lounge, retail space, an entertainment venue, and a fi ve-star hotel. Site location has yet to be chosen, but expected to be in Midtown Manhattan; and the necessary fi nancing for the project that HHHOF is hoping to complete in 2019 is not yet in place. The organization has reportedly begun seeking partners “for the hotel, the concert venue, and a corporate brand to partner with on naming rights.”

Developing Trends (cont’d)

Hip Hop Hall of Fame Museum & Hotel - Rendering

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Developing Trends (cont’d)

Sources: http://www.wsj.com/articles/whats-the-deal-artist-builds-studio-in-greenpoint-brooklyn-1477267791

Co-Working Concept for E-Commerce Tenants to Make its Debut

E-commerce retailers will be able to take advantage of a collaborative environment according to a reported announcement by real estate company the Lightstone Group. While there has been an uptick in some online companies opening brick-and-mortar outposts such as footwear startup Jack Erwin, eyewear retailer Warby Parker, beauty and skincare retailer Birchbox, jewelry retailer BaubleBar; and more recently UK-based apparel startup boohoo.com, other e-commerce startups that don’t have the resources to support their own storefront will have an alternative option. The 10,000-square foot space branded “bio” secured under a 10 year lease is expected to open in early 2017 at 375 West Broadway (SoHo); and will essentially offer a shared retail space to house about 30 e-commerce brands that specialize in beauty, jewelry, fashion and home goods. Amenities will include lounge seating, a café and a bar; and in contrast to a pop-up, startups will benefi t from the opportunity to “animate their own modal shop displays within a unifi ed design-driven environment” with support from an “in-house staff to help grow the brands, along with access to analytic technology.”

Walk-in Medical Clinics Continue to Flourish

The changing nature of healthcare has reportedly been sparked by the rapidly evolving urgent care center industry. In recent years the nature of healthcare has been evolving from a “provider-centric system” to a more “patient-centric system” that is focused on convenience and ease for patients at a time when healthcare costs continue to rise steadily with increased deductibles that have reportedly been caused by the Affordable Care Act (ACA).

The growing number of walk-in, urgent care centers which accept most types of insurance, are designed for the “quick treatment of illnesses or injuries not serious enough for the emergency room” at a fraction of the cost and time of a hospital emergency room. According to reported statistics compiled by the Urgent Care Association of America (UCAOA), there are nearly 7,100 urgent care centers nationwide which see over 160 million patients annually. The surge in volume is partially attributed to an increase in the number of people that now have insurance coverage due to Obamacare and have been able to shift away from emergency rooms to access a doctor. In 2014, 87% of urgent care companies reportedly acquired or built a new location, with 89% reporting an increase in the number of patient visits in 2015 — numbers that are projected to increase with an anticipated 34 million Americans expected to receive insurance under the ACA by 2019. Further driving volumes is that millennials are more likely to favor the walk-in convenience versus doctor qualifi cations as did baby boomer predecessors. The average wait times of 30 minutes or less at a walk-in clinic compares to the roughly 4 hour wait-time average for emergency rooms. Futhermore the signifi cantly lower costs per visit are very attractive, averaging $150 a visit in comparison to the over $1,300 for a similar visit to the emergency room.

More similarly paralleling retailers versus hospital or doctor’s offi ces when seeking locations, urgent care providers put visibility, foot-traffi c, and street-level accessibility in the forefront; and as a result are becoming a key player in the retail market. Viewed as a more stable tenant, long-term tenant, urgent care centers are typically desirable to landlords. While some clinics are established by doctors, about 22% of the nationwide clinics are currently hospital-owned; and another 15% are in a joint venture with a hospital according reported fi ndings of a study by UCAOA, offering larger healthcare systems an alternative method to “drive additional patient fl ow and business” back to their main campuses.

• CityMD launched in 2010, the company has 38 locations throughout the 5-boroughs according to the provider’s website — 18 Manhattan, 9 Brooklyn, 5 Queens, 4 Bronx, 2 Staten Island.

• GoHealth Urgent Care, a partnership of Northwell (formerly North Shore LIJ) and California-based Access Clinical Partners currently has 13 New York City locations.

• ProHEALTH Care, a partnership of Northwell and ProHealth Care Associates currently operates 11 New York City facilities.

• Cure Urgent Care launched in 2014 on the Upper West Side has 2 locations in New York City, partnering with Mount Sinai Health System last year for the Upper East Side location; and is hoping to have a total of 10 locations by 2020.

• UMD Urgent Medical Care – Launched in 2012, has 4 locations — Queens, Brooklyn and Manhattan.

Leasing Activity

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Leasing – 2016 Deal Highlights

Despite signs of a softening retail market, 2016 emerged with several notable retail deals — particularly along 5th Avenue which accounted for 6 of the reported 10 most valuable leases throughout the year based upon estimated base year rent payments.

Tenant Address Est. AnnualBase Rent

Sq. Ftge. Landlord

Nike 650 Fifth Avenue $35 MM 69,214 Wharton PropertiesSL Green Realty

Under Armour 767 Fifth Avenue $30 MM 53,000 Boston Properties

Coach 685 Fifth Avenue $20 MM 24,594 Thor EquitiesGeneral Growth Properties

Longchamp 645 Fifth Avenue $10 MM 10,000 Crown Acquistions

Hershey Edition Hotel701 Seventh Avenue(20 Times Square)

$9 MM 6,940 Witkoff Group

American Girl 75 Rockefeller Plaza $8.5 MM 43,179 RXR Realty

Dyson 640 Fifth Avenue $8 MM 3,167 Vornado Realty Trust

National Football League 701 Seventh Avenue $8 MM 25,000 Witkoff Group

Ermenegildo Zegna 730 Fifth Avenue $7.5 MM 9,000 Wharton PropertiesGeneral Growth Properties

Tom Ford 680 Madison Avenue $6.3 MM 12,300 Thor Equities

*Source: TRD Research

Leasing Activity (cont’d)

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New Space on the Horizon

233-271 West 42nd Street aka 660-668 Eighth Avenue (Times Square) – Tishman Speyer will reportedly be seeking $800 per square foot for ground level space following a planned $65 million renovation of the 400-foot long, roughly 240,000-square-foot retail strip that spans mid-block along West 42nd Street with another roughly 100-feet of frontage along 8th Avenue. Asking rents for space on the basement, 2nd through 4th fl oors will be substantially discounted according to reports. Renovations that are expected to begin in 2018 will be tentatively completed for a 2019 occupancy. Billboard signage in the neighborhood will be included in all tenant lease deals, a perk that normally would reportedly cost millions of additional dollars.

The strip that was constructed by Tishman in the late 1990s is currently occupied by a mix of tenants including B.B. King Blues Club, Cold Stone Creamery, Regal Cinemas and Starbucks which will have the potential opportunity to renew with some tenants expected to vacate portions of the space to allow for the planned renovations. As part of the project, the current jumbled façade will be transformed into a cleaner, more modern look with some spaces ranging in size from 30,000 square feet to 50,000 square feet.

Lease Deals to Watch For

Uniqlo / 23 Wall Street (FiDi) – The Japan-based retail chain is reportedly in talks to lease about 100,000 square feet at the longtime vacant landmark with contract vendee JTRE Holdings, leaving approximately 60,000 square feet of vacancy. The frontrunner among 3 prospective tenants, the potential 15-year, 5-fl oor deal would serve as Uniqlo’s sole Financial District store. The retailer made its debut in the city in 2006, leasing 52,500 square feet on 3 fl oors for a fl agship store at 546 Broadway, adding 2 additional locations — 64,000 square feet at 31 West 34th Street opened in 2011; and 89,000 square feet at 666 Fifth Avenue opened in 2010 according to sources. The corner building, that at one point was reportedly a candidate to be the new home of the New York Stock Exchange located directly across the street, includes space on portions of adjacent 15 Broad Street and 33 Wall Street. Formerly the headquarters of JPMorgan since its construction in 1914, the building has remained vacant since the global fi nancial fi rm vacated it in the late 2000s.

Lease Deal Highlights

Nike / 650 Fifth Avenue (Plaza) – The athletic footwear retailer has reportedly secured a 15-year deal for a new multi-level store near East 52nd Street that will spread across the lower level and the fi rst 6 fl oors of the tower. The space is part of the existing 32,000-square-foot retail component that the 50-50 joint venture of SL Green Realty Corp. and Wharton Properties controls under a 49-year leasehold acquired in 2013 for reportedly $326 million. Lease buyouts of existing retailers Juicy Couture in 2013, and more recently Godiva and Devon & Blakely had freed up space. In addition the fourth through 6th fl oors were reportedly added to SL Green and Wharton’s holdings through an additional lease, expanding the existing basement, ground, 2nd and 3rd fl oor retail component to 69,214 square feet. The added space required approvals by the federal government and the federal trustee that currently operates the tower. The 7,000 square feet of ground level space had a reported asking rent of $4,000 per square foot; and a total reported starting rent of $35 million, with an estimated deal value of $700 million over the term.

It is uncertain at this time if the deal will result in Nike vacating its Niketown space at Trump Tower, 6 East 57th Street. The new store will be about 6 blocks south of the former FAO Schwarz space where competitor Under Armour is planning to open a multi-level store in a 53,000-square-foot portion of the space at the GM Building, 767 Fifth Avenue after negotiations with Nike failed to move forward.

Modell’s Sporting Goods / 845 Third Avenue (Plaza) – The New York City-based sports gear retailer has secured a 10-year lease for 21,000 square feet at the base of the 21-story tower. The space previously occupied by Sport Authority prior to its bankruptcy earlier this year had a ground level asking rent of reportedly $250 per square foot. Modell’s has a total of 159 locations, of which 44 are spread throughout New York City. The new outpost will serve as the retailer’s fl agship, offering an expanded selection of men’s and women’s items.

233-271 West 42nd Street - Rendering

Leasing Activity (cont’d)

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Lease Deal Highlights (cont’d)

Target / 615 Tenth Avenue aka 501-505 West 44th Street (Hell’s Kitchen) – The discount retail chain will be opening its “fl exible-format” store in a 29,000-square-foot space at the base of the planned 90-unit residential condominium located between West 44th and 45th Streets. The store that is expected to open in 2019 will spread across the development’s ground level; and will be similar to the new Tribeca store at 255 Greenwich Street which opened in October, offering a mix of goods designed to appeal to the surrounding neighborhood. Target currently operates 30 fl exible-format stores, with 23 more reportedly announced for 2017, 2018 and 2019 — including one in Brooklyn and another in Manhattan’s East Village.

Hermès / 46-48 Gansevoort Street (MePa) – The high-end brand has secured a 10-year lease for 10,000 square feet that will spread across 3-levels. The asking rent for the ground and 2nd fl oor space was $600 per square foot and $150 per square foot respectively, but pricing for a 3rd level of space was not available according to the report. The new store expected to open in the spring of 2019 will focus on the retailer’s fragrances, jewelry and other accessories; and will be situated within a portion of planned multi-building redevelopment at 46-74 Gansevoort Street by co-developers William Gottlieb Real Estate and Aurora Capital Associates that reportedly received approvals from the Landmarks Preservation Commission in June.

Staples / 5-9 Union Square West (Union Square) – The offi ce supply chain reportedly exercised a fi xed option and will extend its stay in the 21,173-square-foot ground level space for another 5 years. The retailer has been a tenant at the base of the 8-story mixed-use building for 25 years, where retail space if available would reportedly have an asking rent of $400 per square foot.

Cinemex / 400-402 East 62nd Street aka 1124-1128 First Avenue (Upper East Side) – The Mexico City-based theater chain will make its Manhattan debut in the former Clearview multiplex theater which shuttered in 2013. The 50,000-square-foot space will be renovated to create a “luxury movie-going experience complete with reserved, plush seats and high-end foot service.” Back in February it had been rumored that the chain which has 300 locations in Mexico was considering opening a multi-screen theater in the lower levels of 28 Liberty Street in Lower Manhattan which would have required an entirely new build-out; but has apparently shifted plans in another direction.

Ulta Beauty, Cosmetics & Fragrance / 1510-1526 Third Avenue aka 154-198 East 86th Street (Upper East Side) – The publicly-traded Illinois-based chain has reportedly secured a 12,000-square-foot lease at the base of the 442-unit residential complex Park Lane Towers. The terms of the deal were not released, but the asking rent for the ground level space was reportedly $550 per square foot. Ulta’s new outpost will be in close proximity to competitor Sephora which has a store at nearby 144 East 86th Street by Lexington Avenue.

Marshalls / 140 West Street (TriBeCa) – The discount clothing chain will be making its debut in Lower Manhattan, parent company TJX securing a 66,000-square-foot space at the base of the former Verizon headquarters. The new store will spread across a small portion of the ground level and two lower levels with an entrance on the corner of Vesey and Washington Streets; and had a reported asking rent of $350 and $100 per square foot for the ground and lower level space respectively. During the summer it was reported that sportswear companies Under Armour and Nike were both vying for a 40,000-65,000-square foot space, but it is unclear if negotiations are still active at this time.

The entire 98,183-square-foot retail component that is being repositioned and spans a large portion of the ground level space as well as the mezzanine and 3 cellar levels was acquired by Magnum Real Estate and the CIM Group in 2014 for $40 million. The top 21 fl oors of the 32-story tower that spans an entire city block are currently undergoing a high-end residential conversion that goes by the address 100 Barclay as a result of the acquisition by the development team in 2013.

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Retail Investment Market Activity Snapshot

Retail property sales in 2016 through the 3rd quarter reportedly generated a dollar volume that reached over $2.4 billion, representing a 7% year-over-year decline despite 3 of the 4 markets posting increases.

• Northern Manhattan / Bronx Retail Properties led the way boasting the largest year-over-year increases of 30.4%, retail sales dollar volume reaching $198.5 million. The number of buildings sold dropped 45.5% year-over-year, while the average price per square foot increased 37.4% to its highest level of $489 per square foot.

• Manhattan Retail Property sales dollar volume increased 6.2% to reportedly just over $1.5 billion in transactions, despite the number of buildings sold diminishing by 34.3%. Although the average price per square foot increased 50.7% year-over-year to $3,629 per square foot, it remained about 1.5% below the 2014 historical high.

• Brooklyn Retail Property sales dollar volume increased 6%, reaching $333.7 million by the end of the 3rd quarter. The number of transactions decreased by 21.9%, while the average price per square foot reached an all-time high of $663 per square foot, representing a 29.7% year-over-year increase.

• Queens was the only retail investment market to incur a lowering in dollar volume of retail property sales, falling to $435.5 million, or a 43.4% year-over-year decline. Although the average price per square foot of $485 represented a 9% fallback during the same time in 2015, the total number of transactions year-over-year remained basically unchanged.

Sale Activity

Sale Activity (cont’d)

P.13PPPPP.1P.1P.13.131313333Sources: http://www.wsj.com/articles/mall-landlords-dive-deeper-into-retail-assets-1478601002

Mall Landlords Boost Retail Property Surplus Acquisitions

As sales growth among retailers remains tepid, “landlord’s re-leasing spreads, or the change in rent a square foot between expiring and new leases, have narrowed in recent quarters” in an effort to keep vacancies down according to the report. However a growing number of store closures amidst declining sales revenue have given rise to a surplus of retail property, fueling a rise in acquisitions by some of the country’s larger mall and strip center landlords in an effort to thwart the swell in store vacancies. Acquisitions are reportedly ranging from the buying up of space from department stores or other retail locations to acquiring retailers outright. The careful selection of purchases is crucial, as landlords attempt to identify which “new investments could best recapture shoppers’ attention” amidst consumers’ changing shopping habits. In addition, it becomes necessary to convince investors that the spike in property and retail company purchases “are promising growth strategies that will improve their competitiveness” in an uncertain retail environment where the wisdom of expansion has been questioned by some investors.

Chicago-based General Growth Properties has purchased space from Sears Holdings Corp. in the past; and more recently the REIT reportedly acquired (5) stand-alone stores from Macy’s Inc. for $48 million since the beginning of the 3rd quarter, re-tenanting some of the stores with Dick’s Sporting Goods, department store chain Belk Inc., and Lifetime Fitness. In September, General Growth, along with mall operator Simon Property Group led a consortium to acquire the assets of struggling teen-apparel retailer Aéropostale Inc. whose primary market has been shifting further away from brick-and-mortar purchases triggering a bankruptcy fi ling in May. At the time of the court fi ling, Simon was reportedly a landlord at over 160 Aéropostale stores. The winning $243 million bid approved by the U.S. Bankruptcy Court included a plan to keep at least 229 of the retailers total 800 locations open, saving at least 7,000 jobs. Since fi nalizing the sale, the consortium has reportedly upped the number of retained locations to 500, more than double initial projections.

Sale Activity (cont’d)

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New to Market

485 Seventh Avenue (Times Square) – The Lightstone Group is reportedly planning to sell the 4,004-square-foot retail condominium that has a current asking price of $64 million ($15,984 per square foot). Situated at the base of the 16-story building that is being converted into a 618-key Marriott Moxy-branded hotel, the unit is comprised of a 2,596-square-foot space that is currently vacant, and a 1,408-square-foot space located at the corner of West 36th Street which currently serves as the home of sandwich shop Pret A Manger through a lease that reportedly runs through March 2019. In addition to the retail unit, the developer is also selling the building’s 138-space, 27,000-square-foot parking garage which is currently under a long-term lease that expires in 2033 with Icon Parking Systems according to reports.

Sales to Watch For

259 Bowery (Lower East Side) – Premier Equities is reportedly in contract to acquire the 2,860-square-foot retail condominium at the base of the 6-story mixed-use building for $5.5 million ($1,923 per square foot) from developer Charles Saulson. The space located mid-block between East Houston and Stanton Streets currently serves as the home to art gallery Soho Contemporary Art under a lease that reportedly expires in 3 years. The retail unit is directly across the street from the contract vendee’s planned 8-story, nearly 20,000-square-foot mixed-use condominium development at 258-260 Bowery that will host 5 residential units and 5,100 square feet of retail space spread across the cellar, ground and 2nd fl oor levels, Premier having acquired the site for $10 million ($508 per buildable-square-foot) in the fall of 2015.

Sale Highlights

155 Mercer Street (SoHo) – ASB Real Estate Investments has acquired the majority stake in the 3-story, 15,000-square-foot building through its Allegiance Fund from Thor Equities. A $41 million acquisition loan was reportedly secured from Wilmington Trust for the $93 million ($6,200 per square foot) acquisition. The former fi rehouse is currently undergoing a restoration and renovation to serve as a full-service boutique for fashion brand Dolce & Gabbana. The new store will be the 3rd Manhattan location for the luxury retailer, having reportedly secured a triple-net lease in 2015 for the entire building. The building that dates back to 1857 features fl oor-to-ceiling windows ranging in height from 15-feet to 21-feet; and offers 45-feet of frontage. The building last traded for $27.3 million (1,820 per square foot) upon Thor acquiring the property located between West Houston and Prince Streets in 2013.

Outer Boroughs

Shops at Bruckner Boulevard, 1910 Story Avenue (Soundview) – Fee-owner Urban Edge Properties has reportedly closed on the $32 million acquisition of the leasehold for the 113,485-square-foot ($275 per square foot) shopping center. The Paramus, NY-based company was previously the ground lessor for the property that was being leased to sellers Forest City Realty Trust Inc. and Madison International Realty LLC. Acquisition of the leasehold reportedly included the assumption of a $12.7 million mortgage.

Urban Edge Properties is an independent public company launched in 2015 following a spinoff by Vornado Realty Trust of its shopping center holdings according to a press release at the time by the REIT. Vornado had acquired the Shops at Bruckner Boulevard in 2007 for $35 million. The retail center that opened in 1996 spreads across an entire city block in the East Bronx neighborhood; and includes anchor tenants Old Navy, and Marshalls. Located directly across White Plains Road from the Urban Edge-owned 394,855-square-foot Bruckner Commons where the borough’s fi rst ShopRite grocery store is expected to open, the recent acquisition now brings the over 508,000-square-foot retail destination under a single ownership.

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Lending

Lending Activity

21-23 West 34th Street (Penn Plaza) – Wharton Properties has secured a 5-year, $101 million loan from Signature Bank to refi nance the 2-story, 19,054-square foot retail property. The deal includes one 5-year extension option; and reportedly replaces a $100 million mortgage originated by Wells Fargo. The building located between 5th and 6th Avenues currently serves as the New York fl agship for British clothing chain Superdry, having secured a 7-year sublease from former subtenant Esprit in May.

661-667 Eighth Avenue aka 301 West 42nd Street (Times Square) – A group of investors reportedly led by Wharton Properties has secured a 3-year, $60 million loan from the Bank of China to refi nance the 2-story, 17,667-square foot building. The new debt carries a fl oating rate interest based upon Libor; and reportedly replaces a $60 million note securitized by Wells Fargo that carried a roughly 5.9% interest rate. The retail property is valued at over $100 million based on tenant Duane Reade’s increased rent and the site’s unused air rights. The drug store chain occupies the entire building through a lease that reportedly expires in December 2021. Located directly across from the Port Authority Bus Terminal, the building boasts a subway station entrance to the Times Square Station directly in front with access to several subway lines.

534-544 West 25th Street (Chelsea) – Weinberg Properties secured a $65 million construction loan from Shanghai Commercial Bank. The new debt will help fi nance the planned 8-story, 60,000-square-foot development that will serve as the headquarters location for Pace Gallery. Demolition of the existing single story commercial structure that currently serves as the home of the art gallery has been approved by the city’s Department of Buildings (DOB), to make way for the new 135-foot-tall building that will allow Pace Gallery to expand its footprint by 30,000 square feet, for a total multi-level space of 40,000 square feet.

534-544 West 25th Street - Rendering

Development Activity

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New Hotel Developments Abound in New York City

Despite some concerns that the surge in hotel developments in New York City may be causing a hotel bubble, demand reportedly remains high. According to reported statistics compiled by hotel data and analytics company STR, “about 90% of the city’s roughly 110,000 daily rooms were occupied each day in September.” Tourism is up over 5.6% from 2014 and over 36% from a decade ago; and was on pace to reach 59.7 million visitors by the end of 2016 according to reports. However as the growing number of hotels intensifi es competition, it will become more challenging to differentiate themselves from the crowd. Since 2014, an estimated over 200 hotels have opened or are in the pipeline for a 2019 delivery, adding about 25,000-keys if all are completed. Recent new hotel developments add a mix of luxury, midlevel and discount offerings to the growing roster of hotels in the city.

A sampling of some of this year’s newcomers and anticipated openings include:

• Four Seasons Hotel & Residences, 30 Park Place (City Hall) – The condo-hotel that hosts 185-keys and 157 residential condominiums had its ceremonial ribbon cutting in October, with a soft opening throughout the fall. The mixed-use tower features a 75-foot pool, a Four Seasons Spa, Double-height conservatory with baby grand piano, event space, and the New York City debut of celebrity chef Wolfgang Puck’s fi rst Manhattan restaurant dubbed CUT.

• The Beekman, 123 Nassau Street (Insurance) – The 287-key condo-hotel operated by Thompson Hotels had a soft opening in August. Located within the former Temple Court Building that dates back to the 1880s, the landmarked building features a 9-story atrium and pyramidal skylight; as well as eateries by celebrity chef Tom Colicchio and restaurateur veteran Keith McNally.

• SLS Hotel New York, 444 Park Avenue South (NoMad) – The 190-key hotel slated to open in early 2017 will bring the fi rst SLS-branded hotel to New York City. The $150 million offi ce conversion included a 6-story vertical expansion of the former 13-story offi ce building. Guest amenities will include a rooftop lounge with outdoor terrace, private rooftop meeting room, 7,000-square-foot meeting and event space, restaurant and bar.

• Doubletree by Hilton Times Square West, 346 West 40th Street (Hell’s Kitchen) – The 612-key hotel is slated to open in December. The newly ground-up constructed hotel will feature a rooftop bar, a restaurant, and a 1,000-square-foot conference room.

• The William Vale, 111 North 12th Street (Williamsburg) – The 183-key hotel formerly dubbed the Level Hotel opened in September featuring fl oor-to-ceiling windows, a rolling hill park created on a 15,000-square-foot elevated promenade, a 5,000-square-foot landscaped open-air venue, and a 60-foot pool.

• The Williamsburg Hotel, 96 Wythe Avenue (Williamsburg) – The 150-key boutique hotel was slated to open in December; and will feature a rooftop pool, 3 bars and a restaurant.

• Esplendor Bossert Brooklyn, 98 Montague Street (Brooklyn Heights) – The 282-key hotel is reportedly slated to re-open in the next few months. The former Jehovah’s Witnesses property that dates back the 1912 has been undergoing a conversion back to its original use as a hotel. Argentina-based Fën Hoteles will manage the hotel that will feature a 1,992 square-foot rooftop terrace to be utilized by a restaurant.

• 1 Hotel Brooklyn Bridge Park, Pier 1 at Brooklyn Bridge Park (Brooklyn Heights) – The condo-hotel currently under development will host 192-keys and 100 residential condominiums. Slated to open in February 2017, the hotel is part of the Pierhouse Complex; and will feature a lobby farmstand, rooftop bar, fi tness center and spa, and screening room.

• The Estate at Raval, 8-08 Queens Plaza South (Long Island City) – The 54-key waterfront hotel is an adjoining addition to the existing 63-key Ravel Hotel that opened in 2008. The new structure is part of a $10 million renovation of the hotel; and is slated to open in the spring of 2017, featuring a 35,000-square-foot outdoor space, landscaped garden, ballroom, and swimming pool that can be converted into an ice skating rink.

Development Activity (cont’d)

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Development Site Sales

210 West 31st Street (Penn Plaza) – KBS Capital is in contract to acquire the majority 80% stake in the existing 2-story, 23,110-square-foot church for $39.8 million per reported details of SEC fi lings by the REIT. Acquisition fi nancing will reportedly come from investor capital through KBS’ Strategic Opportunity REIT II as well as a loan. Seller Onyx Equities will retain the remaining 20% and co-develop the site of the former monastery associated with the Church of St. John the Baptist into a 2-story, approximately 30,000-square-foot retail development. Proposed project plans for the alteration, which have yet to be fi led, reveal the L-shaped space being divided into restaurant and retail space. In addition, the potential of a rooftop patio and 750 square feet of signage along West 31st Street exists. The 9,066-square-foot site is controlled under a 99-year leasehold that runs through January 2114 which Onyx secured in early 2015 for $6.526 million; and includes (1) renewal option for 25-years according to documents posted on city records.

Projects on the Horizon

246 Mercer Street (NoHo) – Plans for the alteration of the single-story, commercial building located within the NoHo Historic District were received in January from the Landmarks Preservation Commission. Currently home to a Gristedes grocery store at the corner of West 3rd Street, plans call for a redevelopment of the building into 3 retail spaces, with a raised parapet to hide new mechanical equipment on the roof. The structure’s height will remain unchanged since any excess air rights have already been transferred and there is an easement according to reports. The building is part of a larger residential complex that spreads across the entire city block bound by Broadway, Mercer, West 3rd and 4th Streets.

Project Plans in Progress

505-507 West 27th Street / 511 West 27th Street (Chelsea) – The Related Companies reportedly fi led permits in November for the construction of (2) single-story retail buildings. The larger 9,875-square-foot development will be constructed directly under the elevated High Line park on the vacant 11,158-square-foot parcel. The latter 2,469-square-foot parcel located adjacent to the park will give rise to a 5,204-square-foot development. Demolition permits for the existing 3-story, 4,450-square-foot residential building were fi led in early 2016.

111-115 Broadway (FiDi) – Capital Properties is planning to close the 270-foot stretch of Thames Street that is between the (2) landmarked buildings known as Trinity Center. A proposed transformation of the portion of the vehicular roadway that stretches between Broadway and Trinity Place will result in the creation of a marketplace. Located in the vicinity of the World Trade Center Memorial, Trinity Church, and Wall Street, the planned construction of the retail plaza is part of an extensive renovation of both buildings.

The project will also include the re-opening of windows and doors that have been longtime shuttered along Thames Street, replacing them with new glass storefronts for new retail and restaurant space at the buildings’ bases; as well as the installation of “historically accurate street lights” that will provide lighting for the plaza. Prior to the plaza project moving forward, approvals will be required from the city’s Department of Environmental Protection (EPA) due to the raising of manholes that exist along the stretch, the Department of Transportation (DOT) for the closure of the roadway, and the Landmarks Preservation Commission. In addition, community input is being sought through Community Board 1 and the Downtown Alliance. A tentative delivery of the new marketplace is slated for the end of 2017.

210 West 31st Street - Rendering

246 Mercer Street - Rendering

111-115 Broadway / Thames Street - Rendering

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Outer Borough Highlights

Flatbush Avenue Corridor in Boerum Hill Welcomes Roster of Artisanal Tenants

The retail corridor along Flatbush Avenue that lies just south of Downtown Brooklyn in Boerum Hill has undergone a transformation in recent years that has reportedly attracted a diversifi ed mix of new restaurants and retail concepts.

• 166 Flatbush Avenue

- Kings Town – The new “sports-themed gastro pub” will be opening a 3-story outpost with a 5,000-square-foot rooftop space this year featuring a new American restaurant;

- Plan Do See – Although plans have yet to be fi nalized, the Japanese sushi bar will open in a 3,700-square-foot lower level space;

• Ovenly / 210 Flatbush Avenue – The Brooklyn-based bakery is slated to open during the 1st quarter in a 900-square-foot space;

• Mok Bar / 212 Flatbush Avenue – The Korean ramen eatery will open this year in a 2,000-square-foot space that is currently under construction. The retailer’s only other location is in Manhattan’s Chelsea Market.

• Snowdays / 214 Flatbush Avenue – The East Village-based shaved ice cream shop debuted its fi rst Brooklyn outpost at the end of January, joining the companies 5 other New York City locations — 2 in Queens and 3 in Manhattan;

• Shorty’s / 229 Flatbush Avenue – The Philadelphia-style sandwich and cheesesteak eatery will open its fi rst Brooklyn location in an 1,800-square-foot space. The retailer currently has 4 locations in Manhattan;

• Friedman’s / 474 Bergen Street (just off Flatbush Avenue) – The restaurant that offers a selection of homestyle comfort food will be opening in a 1,900-square-foot space, adding to its roster of 4 existing Manhattan locations;

• 447 Bergen Street (just off Flatbush Avenue) – A new Indian concept eatery that will serve traditional Indian food will be opening in an 1,800-square-foot space;

• Orange Theory / 248 Flatbush Avenue – The fi tness brand secured a lease for 4,600 square feet;

• 342 Flatbush Avenue

- Union Market – The grocery market will open in an 11,000-square-foot space;

- SoulCycle – The fi tness brand will open in a 3,700-square-foot space; and

• TD Bank / 42-44 Bergen Street (which fronts Flatbush Avenue) – Canada-based Toronto-Dominion Bank will open a 4,300-square-foot branch, joining a Chase branch at 401 Flatbush Avenue which is the only other national bank in the area.

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Outer Borough Highlights (cont’d)

Carroll Gardens’ Smith Street Corridor Evolving into Restaurant Row

The 13-block Smith Street corridor that runs through the northern Brooklyn neighborhood of Carroll Gardens is rebounding from a period of several retail store closures in 2015 after a reported period of rapid growth that pushed asking rents to nearly $200 per square foot; and coincided with a “sudden increase in competition from new and cheaper retail High Streets like Flatbush and Vanderbilt Avenues and areas of Williamsburg.” As landlords began lowering rents to the current reported range of about $100-$140 per square foot, leasing activity rebounded and has attracted several new retailers – particularly restaurants.

• Leyenda / 221 Smith Street – The pan-Latin cocktail bar opened mid-2015;

• f.o.b. / 271 Smith Street – The Filipino barbecue restaurant will be opening this fall;

• Sunken Hundred / 276 Smith Street – The Welsh restaurant opened August 2016;

• White Maize / 277 Smith Street – The Venezuelan arepas eatery opened in October; and

• Phil & Anne’s Good Time Lounge / 196 Smith Street – The eatery will be opening this year in the former home of restaurant Char No. 4. Will offer “Italian-infl ected Mediterranean cuisine.”

Brooklyn’s Court Street Comes into its Own

The low-key corridor of Court Street which is situated at the crossroads of 5 major neighborhoods — Carroll Gardens, Cobble Hill, Boerum Hill, Brooklyn Heights and Downtown Brooklyn has reportedly been attracting a growing number of national retailers — particularly along the northern end near Cadman Plaza and also south to the Gowanus Expressway. An increasing density of high-earning residents in the vicinity have reportedly attributed to Court Street’s changing profi le. (INDD map in Retail images folder) Although national brands remain the minority along the 24-blocks north of Red Hook, a growing number are expected. Asking rents reportedly reach the $200 per square foot range within the few blocks surrounding Atlantic Avenue, declining as you travel south.

In addition to Chipotle, 140 Court Street; Barnes & Noble, 106 Court Street; American Apparel, 112 Court Street; Lenscrafters, 121 Court Street; Super Runners Shop, 123 Court Street; GameStop, 116 Court Street; and Rag & Bone, 160 Court Street, other newcomers over the last 5-years reportedly include:

• T-Mobile / 93 Court Street – 2,200 square feet in 2015;

• Jacadi Paris / 189 Court Street – 900 square feet in 2015;

• Benefi t Cosmetics / 168 Court Street – 600 square feet in 2014;

• Splendid / 142 Court Street – 1,100 square feet in 2013;

• Nieman Marcus Last Call – 16,000 square feet in 2014;

Other national brands that are checking out the area reportedly include footwear retailers Dr. Martens and Steve Madden, cosmetics and beauty chains Blue Mercury and Kiehl’s, and eyewear e-tailer Warby Parker.

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Outer Borough Highlights (cont’d)

Williamsburg Quickly Becoming a Hotel Destination

The rapidly growing list of diversifi ed offerings within the northern Brooklyn neighborhood of Williamsburg, from bars and restaurants to retail and movie theaters, has now added hotels to the roster with a line-up of several new developments in recent years. Looking back 6 years ago the 64-key hotel-condo hybrid McCarren Hotel & Pool opened in 2011, recently being sold for $22 million to an investor group reportedly led by Empire Capital Holdings which plan to completely re-brand and reposition the hotel that features a ground-level saltwater pool and rooftop bar. In addition, new ownership plans to establish partnerships with local vendors in an effort to take advantage of the area’s diversifi ed artisanal offerings. However according to some sources it was the Wythe Hotel at 80 Wythe Avenue (aka 71-77 North 11th Street) that was instrumental in helping to trigger the transformation of the area upon the 1901 factory being converted into a 70-key hotel that opened in 2012, featuring a restaurant, rooftop bar and movie theater.

Other hotels that have more recently come online or nearing delivery include:

• The William Vale (formerly the Level Hotel) at 111 North 12th Street (aka 55 Wythe Avenue) opened in 2016 featuring a 15,000-square-foot rooftop terrace. The 23-story, 248,000-square-foot hotel hosts 183-keys plus 19,257 square feet of retail and restaurant space, and 35,678 square feet of medical offi ce space.

• Williamsburg Hotel at 96 Wythe Avenue recently opened featureing a rooftop bar inside a water tower, rooftop pool, and basement dance club. In addition the hotel has made available a mix of products and foods from local vendors. The 7-story, 109-foot tall building hosts 160-keys plus approximately 43,515 square feet and 10,178 square feet of community facility and commercial space.

• Pod Hotel at 626 Driggs Avenue is expected to open this year. The 255-key, 100,000-square-foot development utilized a modular-construction design of prefabricated 10x30-foot modules for its construction, created by joining 2 hotel rooms and a corridor. The 3- to 5-story hotel will include nearly 13,000 square feet of retail space and feature an interior courtyard, a rooftop terrace, restaurants and bars.

• The Hoxton at 97 Wythe Avenue is expected to open this year. The 175-key, 59,910-square-foot hotel will feature a rooftop bar and 3 eateries.

• 500 Metropolitan Avenue is currently under construction, reaching 3-stories in March. The 14-story, 200,000-square-foot mixed-use development rising along the Brooklyn-Queens Expressway will host a yet-to-be-named 188-key hotel component spread across nearly 93,500 square feet with a 52,500-square-foot residential component on the upper stories. Amenities will reportedly include basketball and tennis courts on the 2nd fl oor terrace, 2 pools, a restaurant and bar, as well as a selection of retail stores on the ground level.

Another proposed project on the horizon which has yet to break ground is a 14-story, mixed-use hotel-condo that in 2015 was reportedly being constructed in collaboration with Yotel which made its New York City debut in Manhattan in 2011 as part of the MiMA complex at 570 Tenth Avenue. The project was expected to comprise a 110-key hotel with 6-8 condo units on the top fl oors, as well as street level retail and a roof garden.

Wythe Hotel

The Hoxton - Rendering

Pod Hotel - Rendering

Yotel - Rendering

The William Vale - Rendering

500 Metropolitan Avenue Rendering

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Outer Borough Highlights (cont’d)

Notable Lease Deals

Two Trees Management - Double-header deals at 300 Ashland Place aka 286-346 Ashland Place (Downtown Brooklyn) – The newly constructed 379-unit development dubbed BAM South that is located across from the Brooklyn Academy of Music (BAM) within the Brooklyn Cultural District. In addition to a 50,000-square-foot cultural space that will reportedly house a four-screen BAM Cinemas, the 651 ARTS dance studios, and a new branch of the Brooklyn Public Library. In addition the newly created 52,537 square feet of retail space at the building that also goes by the addresses of 113-119 Flatbush Avenue and 6-20 Lafayette Avenue has attracted recent lease signings by:

• Apple – The technology company will be opening its 2nd Brooklyn store, having signed a 12,000-square-foot lease at the building’s base. The 10-year, off-market deal reportedly began negotiations almost 3 years ago.

• Whole Foods – The Austin-based food market chain has reportedly secured a 20-year lease for the remaining 40,537 square feet that will spread across a 7,753-square-foot portion of the ground level and the entire 32,784 square feet of lower level space boasting 17-foot ceiling heights. The new outpost that is expected to open in early 2018 will reportedly bring the retailer’s fi rst lower-priced store dubbed 365 by Whole Foods to the tri-state area, the new name derived from the company’s own 365 Everyday Value product line. The smaller-format concept, about 50% smaller than typical store sizes, was announced in 2015; and intended to offer a ““values-oriented experience geared toward millennial shoppers” according to reports at the time. The new format emphasizes self-service and features a modern, streamlined design, innovative technology, and a curated selection of food products while eliminating more expensive goods. Currently 3 lower-priced stores have been opened, with plans for 20 more.

Gourmet A’Fare / 31 Lincoln Road (Prospect Lefferts Gardens) – The new market being opened by gourmet supermarket operator POM Group will spread across 12,300 square feet in a portion of the ground level space at the base of the 8-story, 133-unit residential rental building. The new outpost will be the 2nd in the borough for POM as a result of the 25-year deal that had a reported asking rent of $60 per square foot. The existing 11,000-square-foot Gourmet Affair market located in the Greenpoint neighborhood at 1133 Manhattan Avenue opened last year under a 20-year lease announced in March.

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Shrinkage & Expansions

City’s Neighborhood Greengrocers Shrinking in Numbers

The number of local family-owned grocery stores that are typically smaller than 7,000 square feet has lessened by about 8%, or 300 stores, over the 10 year period between 2005 and 2015 according to reported statistics compiled by retail consultant Strategic Resource Group. Manhattan accounted for about 1/3rd of the closures of the small markets more commonly known as greengrocers. The growing trend has forced many city residents that are no longer able to pick up a few items close to home to rethink their routines. Mid-sized grocery chains have also been impacted as rising rents in the last few years continued to cut into narrowing profi t margins amidst heightened competition from larger upscale markets, online grocery and delivery services such as FreshDirect, Instacart and AmazonFresh. Even the street vendors that sell fresh fruit are able to discount prices below the grocery markets they are parked in front of.

• Garden of Eden - The 22-year-old upscale chain reportedly fi led for bankruptcy last year after shrinking down to only 3 remaining Manhattan stores, having closed 3 other locations over the last few years.

• D’Agostino Supermarket – The Larchmont, NY-based chain founded in 1932 has reportedly closed 17 of its 26 New York City locations since reaching a peak in 1996. The company’s remaining 9 stores that continue to struggle where given a $10 million line of credit by grocery chain Gristedes’ owner the Red Apple Group (John A. Catsimatidis), with plans to eventually merge the 2 companies.

• Fairway – The New York-based grocery chain that fi led for bankruptcy in May had 12 locations in the city at the time, emerging from bankruptcy 2 months later following approvals from lenders of a $140 million reorganization plan.

New York City’s big-box drugstore chains, which have reportedly increased their number of locations by over 7% between 2013 and 2015, have become the latest to cut into the grocery market share as a result of a growing number of mini-markets being added to many Duane Reade, Walgreens and CVS stores. The growing trend has pushed consumable sales by drugstore chains to approximately 30% according to reports; however some industry people point out that despite consumable sale growth, the food offerings by drugstore chains will not fi ll the void of the declining number of supermarkets. In some cases, small and mid-sized markets have been eliminated to make way for the new development of residential towers that as a result have removed the convenience of a nearby food market for both existing area residents as well as forthcoming tenants in the new building.

• 40 East End Avenue (Upper East Side) – A Gristedes located at the base of an existing 6-story rental building in the Yorkville area was closed during the summer to make way for a ground-up, 18-story condominium.

• 342-350 East 86th Street (Upper East Side) – A Gristedes closed this summer after being sold as part of a development site being reportedly assembled for a potential residential development.

• 142-198 East 125th Street (Harlem) – A Pathmark supermarket that closed last year amidst the bankruptcy of parent company A&P will reportedly be demolished to make way for a new ground-up development, raising concerns by some area residents despite a new Whole Foods being constructed a 10-minute walk away at 100 West 125th Street.

• 250 South Street (Lower East Side) – A Pathmark was demolished to make way for the 72-story residential condominium dubbed One Manhattan Square that is currently under construction.

However the city’s Food Retail Expansion to Support Health (FRESH) program has helped to retain some grocery markets by offering tax breaks and zoning incentives to developers for projects in low-income areas that include food markets. While some landlords reportedly view grocery stores as a valuable amenity, others reportedly are wary of businesses that generated “trash and space for numerous deliveries.”

Source: http://www.nytimes.com/2016/11/06/realestate/new-york-city-small-supermarkets-are-closing.html

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Shrinkage & Expansions (cont’d)

Looming Closures

Kenneth Cole to Shutter Majority of Brick-and-Mortar Stores

The fashion house and shoe company Kenneth Cole Productions is reportedly planning to close the majority of the company’s U.S. stores, Launched over 30 years ago in the Upper West Side, the New York-based retailer is expected to close 63 outlet stores over the next 6 months, leaving only 2 full-priced stores in operation — 328 Bowery in Manhattan’s Lower East Side, and 1100 South Hayes Street in Arlington, Virginia according to the report. Looking ahead, Kenneth Cole will focus on its e-commerce site and international business in an effort to strengthen the company’s global lifestyle brand, while continuing to sell merchandise through other retailers.

Hale and Hearty Reduces Manhattan Outposts

The soup chain launched 20 years ago has opted to shutter 3 of its Manhattan locations as lease renewals brought imminent rent hikes. Locations at 1129 Lexington Avenue (Upper East Side), 40 East 23rd Street (Flatiron) and 432 Park Avenue South (NoMad) shuttered in December. The remaining 25 Manhattan locations, including one in the Chelsea Market, plus locations in Brooklyn are expected to remain in operation according to reported comments by a company spokesperson.

Desigual Shutters Fifth Avenue Outpost

The Barcelona-based apparel chain shuttered its store at 530 Fifth Avenue amidst declining sales following the holiday Black Friday weekend. The retailer which has approximately 500 stores globally was located at the site since 2014, upon reportedly signing a temporary lease for 15,000 square feet spread across the ground and cellar fl oors at the 26-story tower that spans the entire block-front between West 44th and 45th Streets; and more recently on a month-to-month basis. Of the remaining (2) Manhattan locations — 958 Sixth Avenue (Herald Square) and 594 Broadway (SoHo), the latter approximately 3,100-square-foot space iwhich served as the chain’s fi rst U.S. store upon opening in 2009 through a 15-year lease is reportedly expected to close by mid-2017.

American Apparel to Close All Stores

The Los Angeles, CA-based fashion company known for its American-made merchandise will reportedly shutter all 110 of its retail stores, as well as its California headquarters, upon the brand’s assets being purchased out of bankruptcy for $88 million by Gildan Activewear. The retailer initially hoped to improve the company’s fi nancial footing in 2015 through a reorganization of the company’s current debts that had reportedly exceeded its assets with losses posted every year since 2010 according to reports at the time. However despite reportedly emerging from bankruptcy in February 2016, plans to fi le for a second bankruptcy were reported 8 months later in October; as well as considerations of a possible sale following some interest mainly for the company’s wholesale unit and the brand, with some potential inquirers reportedly considering leaving a portion of the stores in operation. Currently American Apparel has 12 remaining outposts in New York City spread across Manhattan and Brooklyn, plus 1-factory outlet location at 250 West 125th Street in Harlem according to their website.

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Looming Closures (cont’d)

Macy’s - Holiday Sales Fall Short

A continued loss of market share has resulted in weak sales during the holiday season as departments stores continue to lose their foothold as the “once-central place in American retailing.” Strong sales on Black Friday and the week before the Christmas holiday were reportedly not enough to offset the lackluster sales during early November and December. Macy’s which began with the opening of a “small, fancy dry goods store on the corner of 14th Street and 6th Avenue” founded by Rowland Hussey Macy in 1858, ultimately became a “full-fl edged department store occupying the ground space of 11 adjacent buildings” 19 years later under the former name R.H. Macy & Co. Currently Macy’s operates approximately 730 stores nationwide, as well as the macys.com website. Ongoing efforts by Macy’s to focus on the retail chains best-performing stores locations has resulted in numerous store closures over the past few years, despite being moderately offset by some new openings.

Amid a 2.1% year-over-year decline in sales on a comparable store basis in November and December Macy’s is reportedly planning to eliminate about 3,900 jobs. Another roughly 6,200 other positions will be cut in an effort to streamline operations, with 68 store closings as part of the intended 100 closings over the next few years announced in August 2016. The 35-year-old, 158,000-square-foot store in Douglaston, Queens was among the roster and expected to shutter early this year. The retailer’s actions are projected to negatively impact store sales by approximately $575 million while generating an estimated $550 million in annual expense savings beginning in 2017 according a press release on Macy’s website. The projected annual savings will enable an additional $250 million investment in the company’s growing digital business and other growth areas such as the expansion of its beauty product division Bluemercury. The 2016 launch of the company’s off-price outlet Macy’s Backstage has helped boost store traffi c, prompting decisions to add another 50 Backstage locations over the next few years.

It has been suggested that efforts to evolve to meet today’s changing retail commerce should include a heightened focus on the shopper’s experience with merchandise that better serves each local market, as well as modifying merchandise offerings to better meet the younger women’s interest in everyday work wear. However department stores continue to face the heightened disadvantages of large store sizes and a dependence on brands, many of which now have their own retail stores. In addition, increased competition from the growing popularity of fast-fashion chains such as Zara and H&M has further hindered department store survival.

Shrinkage & Expansions (cont’d)

Notable Retail Transactions

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Sales

Address Submarket District Sq. Ftge Sold Price Purchaser

155 Mercer Street Midtown South SoHo 15,000 $41,000,000 ASB Real Estate Investments

Lease - Manhattan

Address Submarket District Sq. Ftge Tenant

140 West Street Downtown TriBeCa 68,400 Marshalls

5-9 Union Square West Midtown South Union Square 21,173 Staples (renewal)

46-48 Gansevoort Street Midtown South Chelsea/MePa 10,000 Hermès

650 Fifth Avenue Midtown Plaza 69,214 Nike

615 Tenth Avenue Midtown Hell’s Kitchen 29,000 Target

845 Third Avenue Midtown Plaza 21,000 Modell’s Sporting Goods

24-26 West 57th Street Midtown Plaza 13,436 Bread & Butter 2.0

Lease - Brooklyn

Address Submarket District Sq. Ftge Tenant

300 Ashland Place North Brooklyn Downtown Brooklyn 40,537 365 by Whole Foods

31 Lincoln Road North Brooklyn Prospect Lefferts Gdn 12,300 Gourmet A’Fare

300 Ashland Place North Brooklyn Downtown Brooklyn 12,000 Apple

92 North 6th Street North Brooklyn Williamsburg 10,000 Aland

The Mid-Quarter Retail Report is produced by:Jamie Mason | Director of Marketing & ResearchABS Partners Real Estate, LLC

For More Information Please Contact:

212.400.6060 • www.absre.com

200 Park Avenue South, 10th Floor, New York, NY 10003

Although the information furnished is from sources deemed reliable such information has not been verifi ed and no express representation is made nor is any implied as to the accuracy thereof. Sources: CoStar Group, The Real Deal, Crain’s New York Business, The New York Times, New York Post, New York Yimby, and Commercial Observer

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