By: Adrianne Pasquarelli | Crain's New York Business
When the founder of Dig Inn, the flourishing restaurant chain, went looking for his eighth outpost in the city, he eyed a number of spots before he took a chance on a planned downtown food court overlooking the Hudson River. Less than a month after that collection of 14 eateries opened at Brookfield Place, Adam Eskin reported that he has a success.
"The area has been filled with people forming lines day in and day out for lunch," said Mr. Eskin. "And we've been pleasantly surprised to see a lot of strollers coming in even after 5."
The quick-serve chain is among the first in a wave of eateries, hotels and retailers just now beginning to hit the streets of a significantly rebuilt and reimagined downtown Manhattan. During the course of the next year, 635,000 square feet of retail space will open, to be followed by another 200,000 square feet of shops by late 2016. All told, it is one of the largest additions to the retail landscape in the city's history.
"Downtown is on every retailer's radar screen," said Robin Abrams, executive vice president at real estate firm Lansco Corp.
Those who recently have inked leases range from venerable names as Tiffany & Co. to obscure Cambodian eatery Num Pang. Saks Fifth Avenue is said to be closing a deal as well. All are eager to serve not just throngs of tourists and the area's growing office population—which now includes hundreds of tech and media companies—but also the swelling residential population.
The Downtown Alliance estimated there are now 61,000 people living in lower Manhattan. What's more, they have an average household income of $204,000, more than double the citywide average. Meanwhile, in excess of 11.5 million visitors are expected to flood the area this year. Some will stay in downtown's 18 hotels, a number expected to double in the next two years.
"It's a unique situation," said Jessica Lappin, president of the Downtown Alliance. "To have hundreds of restaurants, bars and hip shops all opening up in the near future—that's something I don't think people have fully grasped yet."
Landlords declare victory
Downtown's new shopping centers, including Pier 17 at the South Street Seaport, as well as Brookfield and its neighbor across West Street—the World Trade Center—will help attract even more people. A growing number of landlords already are claiming victory. Brookfield, for example, said it has leased 90% of its 200,000-square-foot, two-story luxury mall in the base of its complex. It will open in March, likely with Saks as an anchor, and with gilt-edged names like Hermès and Burberry.
"You've got a huge community downtown that rivals some of the top markets in the country," said Erin Ersenkal, vice president of guideshops at menswear brand Bonobos, which is opening at Brookfield. "There's an opportunity to do a lot of business down there."
If history offers any indication, the future could be bright indeed. The old World Trade Center mall was the third-highest-grossing one in the nation at its peak in 2000, according to Ed Hogan, national director of retail leasing at Brookfield Office Properties. With all the growth in the area since then, revenue for retailers is expected to be even greater this time around.
"We knew the market wanted a luxury venue downtown," said Mr. Hogan. "We put together a dynamic mix of brands that will please all fashionistas."
Over at the World Trade Center, 365,000 feet of retail space is reportedly 80% leased. Probable tenants include Kate Spade, Tiffany and Apple.
The mall's owner, Westfield Group, is also handling the retail leasing of Fulton Center, the transit hub a block east on Broadway. Brokers, who say the 65,000-square-foot complex is fully leased, expect Fulton's tenants to include beauty salons, drugstores and grab-n-go eateries.
Westfield, which declined to comment, was able to offer transit-center options—where shops will open by the end of the year—to retailers that might not have made a good fit for World Trade.
In the shadow of the Fulton Center along Broadway, large storefronts are going fast. Urban Outfitters, the trendy hipster chain based in Philadelphia, recently opened at 182 Broadway, while Spanish fast-fashion retailer Zara inked a 15-year deal across from the Fulton Center. Urban's sister brand Anthropologie is rumored to be negotiating for space nearby as well.
'It actually happened'
"All the companies talking about going downtown—it actually happened," said Faith Hope Consolo, chairman of the retail group at Douglas Elliman.
Over on the East River, Pier 17 will have a 1.5-acre rooftop venue for concerts, sporting events and weddings when it opens in two years. The center is expected to offer a New York-themed experience, according to Phillip St. Pierre, general manager of the South Street Seaport for developer Howard Hughes Corp.
"We really want to get back to that place where the Seaport district is viewed as one of the most important authentic-New York experiences in Manhattan," he said.
And rents are rising as a reflection of demand. Asking prices at Brookfield, for example, range from $300 to $500 a square foot, and even Fulton's rents are above $250, say brokers.
Broadway also is commanding rents around $500—more than double the prices of 2012. Real estate executives expect the momentum only to increase.
"The energy of the neighborhood will come alive as projects open and construction disappears," said Mr. Hogan. "People will really enjoy the work that's been taking place over the last few years."