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Is Soho approaching the ceiling of retail rents? The evidence is mounting. The Real Deal took a hard look at the neighborhood and found listings for 95 available retail properties — or, to look at it another way, 500,000 square feet of selling space that isn't being utilized. Broadway and West Broadway have the most free space, and the percentage of vacancies right now is nearly double what it was at this time last year.
The biggest factor behind this change is pretty obvious: Money, money, money. The average yearly rent per square foot is now $535, but that number can vary widely depending on the block. The real estate publication uses 489 Broadway, which currently houses Ricky's most-Instagrammed beauty products, as a prime example — that space on the corner of Broome Street runs for $1,700 per square foot.
Some experts believe that this is just part of the natural order of events. "At some point in every cycle, the tide turns," a vice president of investment firm Aurora Capital explained. "Rents rise to uncomfortable levels for retailers, the pace of retail sales slows, retail leasing velocity comes to a halt."
And that's why you've likely been venturing to what used to be considered side streets to check out new stores. "What's happened is streets such as Broadway, Prince and Spring, they're out-pricing each other," John Brod of ABS Partners Real Estate said. "That's why Wooster, of all the streets in the area, is seeing a revival."
The strongest way that Broadway can attract new tenants would be to lower prices — though the article points out that companies with enough money (especially international ones) are still willing to thrown down big bucks for a premiere space, with address prestige superseding whether the store actually makes money. Cases in point: the massive Zara that set neighborhood real estate price records last year, and the rumors that Nike might be taking that up-and-coming space on the corner of Spring Street that replaced the Baked by Melissa window and Kiosk.