Manhattan Retail Marketview

Manhattan Retail MarketView

Q3 2014 CBRE Global Research and Consulting

U.S. CONSUMER CONFIDENCE U.S. JOBS ADDED U.S. UNEMPLOYMENT RATE U.S. GDP (SEPT ’14) 86 (SEPT ’14) 329,000 (SEPT ’14) 5.9% (SEPT ’14) 3.9%

Market Overview Retail News The U.S. unemployment rate fell to 5.9% where it leased approximately 55,000 in September, the lowest level since sq. ft. The debut of these two stores in • In the Meatpacking District, Samsung July 2008.1 Retail sales for the quarter Downtown Manhattan demonstrates the has signed a lease for the entire remained stable, and sales increased area’s significant traction and continuing building at 837 Washington Street, by 4.3% year over year.2 New York growth. Meanwhile, at Hudson Yards, which includes 55,000 sq. ft. of indoor City unemployment decreased to 6.1% Neiman Marcus, the Dallas-based space and 7,000 sq. ft. of outdoor as of September 2014, similar to the luxury department store that has been in space. national trend, while employment in the operation since 1907, is slated to open private sector improved, increasing by its first Manhattan store in 2018, leasing • Microsoft will open its first-ever flagship 95,400—a 2.8% year-over-year gain.3,4 250,000 sq. ft. on multiple levels. store in 8,700 sq. ft. of space at 677 The Manhattan office market witnessed Fifth Avenue. substantial activity, leasing a total of In addition to these recent announcements, 22.96 million sq. ft. year to date, a 27% Nordstrom, Barneys New York, Macy’s and • Now the tallest residential tower in the year-over-year increase. Manhattan’s Bergdorf Goodman will also contribute western hemisphere, 432 Park Avenue office leasing is on pace to be the highest- to the department store momentum. contains approximately 412,000 sq. ft. volume leasing year in a decade. Nordstrom will anchor Extell’s development of residential space. The building will at 225 West 57th Street, occupying also contain a retail component totaling Manhattan retail leasing activity was largely approximately 285,000 sq. ft. across 93,000 sq. ft. shaped by the announcement of three seven stories; the store is expected to open new department stores in Q3 2014. Saks in 2018. In addition to its current Madison • Acadia Realty Trust acquired two retail Fifth Avenue will expand its presence by Avenue location, Barneys will return to its co-ops at 131-135 Prince Street, serving as an anchor tenant at Brookfield original location in Chelsea on Seventh totaling 3,000 sq. ft., for $50 million. Place, occupying a four-floor, 85,000-sq.- Avenue between 16th and 17th streets, ft. store and joining other luxury tenants where it will occupy 57,000 sq. ft. across including Burberry and Salvatore seven stories. Macy’s at Herald Square Ferragamo. Saks OFF 5TH, the outlet and Bergdorf Goodman in the Plaza division of Saks Fifth Avenue, will open its District are currently undergoing extensive first store in Manhattan at 1 Liberty Plaza, renovations.

1 U.S. Bureau of Labor Statistics 2 U.S. Department of Commerce 3,4. NY Department of Labor Figure 1: Notable Transactions - Q3 2014 Address Size (Sq. Ft.) Tenant Industry 9-19 Ninth Avenue 30,000 Restoration Hardware Home Furnishings 793 Madison Avenue 9,000 Louis Leeman Shoes 136 Greene Street 7,400 Brunello Cucinelli Apparel/ Accessories 513 Broadway 6,000 True Religion Jeans Apparel/Accessories 303 Tenth Avenue 5,100 Hudson Market Restaurant/Consumables 699 Madison Avenue 4,388 Jimmy Choo Shoes 33 Union Square West 3,300 Dylan’s Candy Bar Restaurant/Consumables 1333 Broadway 3,265 Shake Shack Restaurant/Consumables Brookfield Place 3,161 Omega Jewelry 16 West 18th Avenue 1,706 Rent the Runway Apparel/Accessories 94 Charles Street 1,400 Billy Reid Apparel/Accessories 127 Prince Street 1,400 Lululemon Men’s Apparel/Accessories 680 Madison Avenue 650 Morgenthal Frederics Optical Store Source: CBRE Retail Research Group, Q3 2014. © 2014, CBRE, Inc. © 2014, CBRE, Inc. Source: CBRE Retail Research Group, Q3 2014. 940 Madison Avenue, and in 2015 940 Madison Avenue, and in 2015 the Metropolitan Museum of Art will Breuer take over the Whitney Museum’s Building at 945 Madison Avenue. The museum will reopen in 2016 to showcase the Met’s collection of modern and contemporary art. These two openings—augmented by visitors from renowned hotels such as the Carlyle, the Surrey and the Mark—will likely result in higher foot traffic, which may attract additional retailers. The average asking rent on this corridor is $935 per sq. ft. with the Men’s Store in the Rhinelander Rhinelander Store in the with the Men’s as well as three different Mansion, the the street, including stores across Flagship in a and Home Women’s “palace” that limestone Beaux-Arts entrants will opened in 2010. New Leeman. Louis include Givenchy and and Renta Oscar de la Additionally, footprints both expanded their Valentino Avenue in on this section of Madison 2013. 72nd Street up The stretch north of become home to to 79th Street has for Madison a new type of retailer Avenue. Hip, contemporary clothiers Milly like Calypso, Zadig & Voltaire, have all opened Taylor and Rebecca stores, attracting a younger generation Apple will of shoppers. Additionally, be opening a 12,580-sq.-ft. space at accessories. Asking rents are more accessories. Asking rents are more modest, averaging $1,600 per sq. ft., and current stores house luxury retail such as Alexander McQueen, Céline, Chanel and Bottega Veneta, has a long- Lauren Ralph Lanvin. established presence on this corridor, office population as well as the tourist office population as well as the tourist Notable Fifth Avenue. overflow from retailers along this stretch include Hermès, Mulberry Barneys New York, recently leased Fendi and Tod’s. space at 598 Madison Avenue, on the northwest corner of 57th Street. located on Madison Avenue Retailers between 62nd and 72nd streets typically have smaller footprints, which provide an optimal boutique space shoes and for products like jewelry, continue to climb, currently averaging currently averaging continue to climb, $1,700 per sq. ft.—more than double 2009’s average asking rent of $800 per sq. ft. Madison Avenue between 57th and 62nd streets is the most heavily trafficked section of the corridor and boasts the highest average asking rent, at $1,835 per sq. ft. The stores on this stretch tend to have larger floor plates than other sections of Upper Madison Avenue, and cater to the surrounding renowned retail destination. retail destination. renowned elegant by an exclusive, Characterized a the corridor features environment, luxury brands, diverse mix of the finest or many situated in brownstones Revival Renaissance limestone French built as private townhouses originally of Madison Avenue homes. The stretch 72nd streets, which between 57th and blocks of provides 15 contiguous one of the most retail, is considered in Manhattan. prestigious corridors Madison Avenue Asking rents on Upper Upper Madison Avenue is a world- Avenue is a Upper Madison

ASKING RENT OF FT. $800 PER SQ. 2009’S AVERAGE 2009’S AVERAGE PER SQ. FT.—MORE FT.—MORE PER SQ. THAN DOUBLE CLIMB, CURRENTLY CLIMB, CURRENTLY $1,700 AVERAGING CONTINUE TO ON UPPER MADISON AVENUE ASKING RENTS

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VE RI D T ES W 1.77% 4.28% 5.55% 6.20% 7.24% -0.55% 13.23% 16.53% 10.25% 12.56% -13.03% % Change** © 2014, CBRE, Inc. $386 $262 $402 $256 $738 $356 $865 $1,651 $3,150 $1,082 $2,229 Q3 2013 Average Asking Rent Source: CBRE Retail Research Group, Q3 2014. 1.27% 6.15% 1.90% 3.20% 6.22% 5.65% 0.64% 0.73% -3.25% -0.17% 10.88% Midtown Fifth Avenue from 49th to 59th 49th to 59th Avenue from Fifth Midtown experienced a substantial streets also average asking rise in its year-over-year increased by 13.2%. rent, which shopping as a premier Recognized Avenue this portion of Fifth corridor, rents that continue to commands asking to secure highly rise as the demand area remains coveted space in the The unprecedented branding strong. area’s combined with the opportunity, as a global retail compelling image to the steep destination, contributes which has average asking rent, per sq. ft. The surpassed $3,500 continues to demand from retailers prevail, dmonstrated by the wave of Polo newcomers including Valentino, and, soon, Microsoft, Lauren Ralph which will occupy the former Fendi space. % Change** $347 $277 $317 $268 $814 $390 $854 $1,668 $3,500 $1,067 $2,250 Q2 2014 Average Asking Rent $336 $277 $352 $271 $860 $393 $860 $1,771 $3,567 $1,101 $2,390 Q3 2014 Average Asking Rent Nearby, at 1333 Broadway, Urban Urban at 1333 Broadway, Nearby, Outfitters recently opened its new lifestyle store, its largest in the world, and Shake Shack will open a new restaurant in 2015. command higher rents. Some higher rents. Some command asking have lowered their landlords that it the understanding rents with to attract may be more challenging certain tenants. increase The largest year-over-year Square, at 16.5%, a occurred in Herald new product coming rise attributable to above the on the market priced H&M will that corridor, average. Within in the world, with open its largest store at Herald Center. 63,000 sq. ft. of retail transparency for ground-floor retail for retail for for ground-floor transparency typically loan offices, which banks and Parameters 34th Street Fifth to Seventh Avenues Fifth Avenue 14th to 23rd Streets Broadway Houston to Broome Streets 14th Street Ninth to West End Avenues Broadway Street to Chambers Battery Park Third Avenue 60th to 72nd Streets Madison Avenue 57th to 72nd Streets Fifth Avenue 49th to 59th Streets Fifth Avenue 42nd to 49th Streets Broadway and Seventh Avenue 42nd to 47th Streets Broadway 72nd to 86th Streets Average Asking Rent for Major Retail Corridors - Q3 2014 (North to South)* Corridors for Major Retail Asking Rent Average :

Figure 3 Meatpacking District Downtown Soho Flatiron Times Square Times Herald Square Midtown Midtown Upper East Side Upper Madison Avenue Upper West Side Neighborhood imposed regulations on frontage and imposed regulations on frontage and the re-zoning of the Upper West Side to Side to the re-zoning of the Upper West create a Special Enhanced Commercial the zoning has District. Specifically, 12.6% decline in its year-over-year year-over-year 12.6% decline in its decreasing from average asking rent, $402 to $352 per sq. ft. as a result of market at a price slightly higher than higher than market at a price slightly Upper the market’s average. However, experienced a Side Broadway West ft. can be attributed to a rise in asking to a rise in asking ft. can be attributed as well as rents of existing availabilities, availabilities, the addition of new which came to including corner space, increase on Upper West Side Broadway. Side Broadway. Upper West increase on average asking rent The increase in the ft. to $352 per sq. from $317 per sq. Manhattan’s major retail corridors saw corridors saw major retail Manhattan’s from Q2 increases slight to moderate 10.9% 2014, led by a 2014 to Q3 MAJOR RETAIL CORRIDORS RETAIL MAJOR rents on average asking Nine of 11 ** Percentage changes are based on unrounded asking rents changes ** Percentage *Based on ground-floor only; not inclusive of subleases

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Q3 2014 Manhattan Retail | MarketView 5