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LIC Retail Continues to Grow
The Real Deal, January 01, 2010
Long Island City retail expands beyond the warehouse
More stores and restaurants open in Long Island City, despite economy and with boost of free rent
By Barbara Thau
William Jordan of CBRE in front of 12-01 Jackson Avenue in Long Island City, where the Natural Frontier Market is opening soon.
New retail is trickling into Long Island City to catch up with the
luxury condo and rental building boom of the last four years.
Tony restaurants and stores -- from spas to gourmet food shops -- are filling in among the waterfront properties and along Jackson Avenue and Vernon Boulevard.
Despite the struggles Long Island City has seen on the residential side of the market because of large amounts of new inventory, retail in the area has seen a growth spurt, even as it has been slowed somewhat by the recession.
The area still has one of the largest concentrations of industrial businesses in New York City, but now old lumberyards, electrical shops and food processors commingle with trendy cafés and boutiques.
"There was no retail market 10 years ago, because this area was warehouses," noted William Jordan, a vice president at CB Richard Ellis' outer-boroughs office.
The population growth has eclipsed other neighborhoods (the area added 3,640 units of housing between 2002 and 2008, according to the Long Island City BID). However, the neighborhood has been light on some basic retail services, said Robin Abrams, an executive vice president at Lansco Corp., which does work in Long Island City.
Now that seems to be changing.
"There is activity [from] tenants that have been looking at the area for some time, starting to sign leases. They want to be there because there is a residential population that has evolved over the past few years," Abrams said.
For the most part, retail rents have held relatively steady, unlike many areas of the city, where they have fallen with the economic downturn, brokers said. Jordan said in his estimation, they've slipped about 10 percent during the downturn. But among landlords the average concession in Long Island City is four to six months of free rent -- two months longer than in more established markets. That's because the perception by some merchants is that the "waters are not tested" in the area, Jordan said.
Abrams said one of the reasons retail rents have not dropped as sharply in Long Island City is because they "never got overly aggressive."
Meanwhile, although a few retail closings -- such as the Brazil Coffee Shop and a party store called the Purple Pumpkin -- have hit the area, they have been few in number, brokers said.
The stores that have shuttered are longtime merchants that were up for renewal and opted not to pay the new higher rents, said Patricia Dunhy, senior vice president of Rockrose Development Corp. "That's what happens when you have gentrification of an area," she added.
At the base of the luxury waterfront properties, retail tenants have already started moving in. At Rockrose's 394-unit luxury rental at 47-05 Center Boulevard -- where CBRE itself moved in last October -- Emily Spa is slated to open by mid-2010, and the Mexican Cantina/Taqueria restaurant is scheduled to open in fourth quarter 2010.
Asking rents were $35 per square foot, Dunham said.
The building already houses a Duane Reade and the Food Cellar, an upscale grocery store.
Rockrose developed the retail properties at 47-05 as well as upscale rental 47-20 Center Boulevard (the latter of which is now owned by TF Cornerstone, which was started by two of the brothers from Rockrose), where Shi, a high-end Asian fusion restaurant, and wineshop Blue Streak opened last year.
Retail is also filling in across the street at 4-75 48th Avenue at luxury rental Avalon Riverview North, where Pooches Sport & Spa, a doggy spa, opened last month.
The residential boom has also spurred the retail transformation of Vernon Boulevard, just blocks away. Italian restaurant Testaccio opened in November at 47-30 Vernon Boulevard, and El Ay Si, an American bistro, opened a few doors down at 47-38 Vernon Boulevard last month.
"Eventually, there will be [more] local boutiques and stores appealing to families as more and more families move in," Lansco Corp.'s Abrams said.
To her point, Little Closets, a children's consignment boutique, opened in the fall at 46-46 Vernon Boulevard.
Long Island City's retail emergence has also been seen east of the waterfront, on Jackson Avenue, which has until recently been somewhat desolate.
Brokers singled out the upcoming openings of Natural Frontier Market (in a new luxury rental building at 12-01 Jackson Avenue) and the Burger Garage (on Jackson Avenue near Court Square), the latter from high-end restaurateur the Palm, as pending upscale additions to the strip.
CBRE's Jordan brokered the lease for Natural Frontier Market, which has an asking rent of $35 to $40 a square foot.
At the same time, the city's $17 million upgrade of Jackson Avenue will make way for new sidewalks and landscaped medians.
"It's going to make it much more desirable as a retail location in the coming year," said Dan Miner, senior vice president of business services for the Long Island City BID.
High-profile commercial projects are also expected to bring more retail.
In Long Island City's commercial core, CUNY Law School has purchased six floors in Citigroup's 2 Court Square tower. The space will be completed for the fall 2011 semester.
Meanwhile, also in Court Square, the Tokyo Inn New York is planning what would be the biggest hotel in the city outside of Manhattan.
Despite the wave of activity, the credit crunch has slowed down some projects in the area. Building has stalled at 4300 Crescent Square, Rockrose's planned luxury rental development. "We're looking for financing," Dunham said.
When completed, the 700-unit building will include 25,000 square feet of retail.
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