Investors who shelled out more than $940 million to buy retail-focused buildings and condominium and cooperative units in Soho over the past six years are today sitting with their spaces vacant, according to a recent analysis by The Real Deal.
That’s within the nearly $4 billion of retail-focused acquisitions made in Soho over that period, totaling just under 900,000 square feet of retail space.
Real estate players including 60 Guilders and Ponte Gadea paid top dollar for store space and are now working to fill it as the retail market shifts underfoot. In total, investors bought 40 properties in the neighborhood that as of last month had more than 163,000 square feet of retail space sitting vacant, representing nearly one-third of all the vacant space in the district.
As the retail market struggles citywide, landlords are under pressure to occupy the space, regardless if they’re able to achieve the rent they anticipated when they closed the sale.
Soho saw average asking rents double from 2008 to 2014, hitting $890 per square foot that year, figures from the Real Estate Board of New York show. While those numbers have declined, reaching $812 in May, many tenants still aren’t signing up. If they are, it’s for short-term deals as they struggle with an unpredictable economy and the rise of online retail.
To get an up-to-the-minute snapshot, TRD walked all 38 city blocks in Soho recently and checked in on the 750 buildings there, finding approximately 569,000 square feet of retail space vacant, or about 16.3 percent of the total 3.5 million square feet of retail.
To be sure, several of the high-profile acquisitions were entire buildings including office space above, but in most cases, a large portion of the value in a Soho commercial building is the retail.
Kevin Chisholm and Bastien Broda’s 60 Guilders, in different partnerships, have been one of the most active buyers in Soho in recent years. They purchased at least five buildings, and now two of those buildings, totaling just over $125 million in purchases, are vacant in their retail portion. The properties are 106 Spring Street, acquired for $105.4 million with the Carlyle Group; and 119 Spring Street for $20 million, with Meadow Partners.
Ponte Gadea, an investment firm controlled by Spanish billionaire Amancio Ortega, purchased 490 Broadway for $140 million in January 2016, and the landmarked building’s retail has remained vacant since. Just down the street is 375 West Broadway, which Pearlmark Real Estate Partners purchased for just shy of $119 million in June 2014. The storefront has been empty since Anthropologie closed. A block north is 60 Guilders’ 106 Spring Street, acquired in April 2016 and has remained empty ever since. These three properties are all within a few minutes’ walk from one another and represent $364 million of unoccupied retail space.
Carlyle declined to comment; the others could not be reached.
There are other concentrations as well, including some areas such as the intersection of Prince and Wooster streets, where several stores have been left vacant on a single block. From the corner, a passerby could observe three vacancies on the same block, at 113 Prince Street and 138 and 146 Wooster Street. The Wooster Street properties were purchased in the past four years for a total of about $55.7 million. Three more pricey vacancies can be found on Spring Street — at 165, 178 and 182 Spring, all in the two-block stretch between Sullivan Street and West Broadway. Those vacancies total over $41 million of unused retail space.
For some owners, the empty storefront is just a necessary transition to land a tenant. For example, 462 Broadway, owned by Meringoff Properties, hasn’t changed hands recently. However, Meringoff refinanced it in June 2016 for $110 million, putting additional pressure on the owner to find a tenant for the space quickly. Representatives from Meringoff attribute the vacancy of the property to a conscious decision on their own part, keeping the space empty throughout the long process of rezoning it.
Jason Vacker, CEO of Meringoff Properties, said that building was recently rezoned, increasing his flexibility to lease it up.
“Our building, which just received city approvals [last] month, can now be rented to any type of retailer,” Vacker said. “We expect strong demand for one of the few buildings where potential tenants won’t have to worry about whether or not their use conforms to zoning.”
Correction: An earlier version of this story incorrectly identified a store as vacant that was not, in fact, vacant.