Billionaire landlord Peter Brant had a simple message for Prada when it came time for the high-end Italian retailer to renew the lease for its stylish SoHo flagship recently: Pay up.
To stay in its Rem Koolhaas-designed store on the corner of Broadway and Spring Street, Prada did so in spectacular fashion. In February, it agreed to shell out more than $1,000 per square foot for its 10,000-square-foot space, the first four-digit rent for a retail store ever recorded south of midtown, and proof positive of SoHo’s emergence as a global destination.
“Tenants want an alternative to the uptown market,” said Joseph Sitt, who owns properties in midtown as well as SoHo. “There is no good brand that comes to New York City from anywhere in the world that now thinks they can be in only one or the other.”
With its shopper-clogged sidewalks and growing reputation as one of the city’s capitals of cool, SoHo is taking its place alongside Fifth Avenue, Madison Avenue and Times Square as a must-have location for retailers. Last year, Tiffany & Co., famed for its Fifth Avenue flagship, opened a 7,000-square-foot location at 97 Greene St., between Prince and Spring streets.
In the coming weeks, Balenciaga plans to follow suit, opening a shop a block away at 148 Mercer St. Other luxury brands that have settled in SoHo in recent months include Stella McCartney, Versace and Yves Saint Laurent.
“For a long time, there were brands there because it was hip and it was sexy, but they weren’t necessarily making a lot of money,” said Michael Glanzberg, a retail broker with Sinvin Real Estate, which specializes in the SoHo market. “Now there are a lot more shoppers who come and really spend, not just a few hundred dollars, but thousands on luxury items.”
The influx is sending both rents and building prices skyrocketing to heights that would have been unimaginable only last year—indications of SoHo’s new status as the city’s hottest retail market.
A report two weeks ago from real estate services firm Cushman & Wakefield found that rents in SoHo had jumped nearly 35% in the first quarter alone, to an average of $423 per square foot—by far the biggest increase recorded in any major retail market in the city.
The gains were even more remarkable on SoHo’s busiest streets. In the past year, rents on Broadway have soared by more than 50%, to $756 per square foot. On Prince Street between Wooster Street and Broadway, SoHo’s priciest block, rents did better, ballooning 65%, to $850 per square foot on average.
“This is historic,” said Michael O’Neill, a retail broker at Cushman, noting that since the end of the recession, rents in the neighborhood have far outstripped those set at the giddy peak of the boom in 2007.
Retail broker Cory Zelnik credited the more than 50 million tourists who now flock to the city annually for much of SoHo’s meteoric rise, the same group whose voracious appetites for everything from silk scarves to iPads pushed rents through the key $1,000 mark in 2008 in Times Square, and several years earlier on Fifth Avenue.
“SoHo is world-renowned at this point, and tenants have begun to understand that and pay accordingly,” said Mr. Zelnik.
With all that going for them, area landlords have unshackled their ambition and are boldly quoting four-digit rents for their best properties. The owners of 120 Prince St., a seemingly modest two-story, red-brick property, are aiming for rents as high as $1,200 per square foot when space becomes available there starting next year.
The owners, a group that includes Crown Equities, Centurion Partners and Imperium Capital, have a lot riding on their ability to get such big numbers. Last year, they bought the 2,000-square-foot property for a whopping $20 million.
Similarly, Mr. Sitt and another SoHo landlord, Jeff Sutton, purchased a rundown two-story retail building at 529 Broadway last year for $150 million with a goal of redeveloping it into a glass box that will command rents rumored to be as high as $1,600 per square foot. Several tenants, which include Nike, sources say, have already shown some interest in the space that sits on one of the busiest corners in SoHo: the intersection of Broadway and Spring Street.
For Karen Bellantoni, a retail broker at RKF, the current boom has an all-too-familiar ring. She notes that rents have shot up several times since the former industrial area drew its first art-gallery tenants four decades ago, only to crash to earth.
“At some point, reality is going to catch up,” Ms. Bellantoni said.