Manhattan's Blighted Soho District Showing New Signs of Life

By Esther Fung

The pandemic has been especially hard on Manhattan's SoHo neighborhood, but there are recent signs the popular shopping district may be on the mend as lower rents attract fresh interest.

Italian women's fashion brand Pinko signed on Wednesday a sublease at 143 Spring Street, taking over a 4,925 square foot property formerly occupied by Bed Bath & Beyond, to create a new U.S. flagship store.

One block over, luxury boutique retailer Valentino SpA last month signed a lease for its first SoHo store, occupying a two-story space of 8,718 square feet. In December, big-box retailer Target Corp. signed a 27,600 square foot lease at 600 Broadway in December.

Brokers credit lower rents for helping to lure back tenants, as well as the recent rollout of vaccines which has raised the prospect of a recovery in tourism.

The pandemic thinned out the number of visitors to SoHo, and it all but eliminated the throngs of international tourists that typically flock there for strolling, shopping and dining. Over the summer, vandalism and looting kept many visitors away and caused a number of shops to board up their windows, leaving the ritzy district marred by vacant or barricaded storefronts.

But attractive terms helped convince Pinko to agree to at least a one-year commitment to SoHo, said Alex Carini, president and founder of Carini Group, a commercial and residential real-estate brokerage focused on European brands in the U.S.

"We have negotiated lease terms for Pinko that are at a very significant discount" to what the main leaseholder is paying, he said.

Pinko's yearlong sublease with options to extend is for $30,000 a month or 15% of sales, whichever is greater. This allows the tenant some downside protection and offers the landlord the chance to get paid more if business is good. It works out to a yearly rate of $73 a square foot.

"The one-year lease is a good way to weather the uncertainties," said Mr. Carini.

The SoHo district had a retail availability of 29.5% in the fourth quarter of 2020, up from 23.8% at the end of 2019. This meant close to one-third of the space in the neighborhood from Houston street to Canal Street was vacant or available for lease. Meanwhile, average asking rents tumbled 22% to $290 a square foot in the fourth quarter, down from $370 at the end of 2019, according to real estate services firm Cushman & Wakefield.

SoHo's sky-high rents started to slide after reaching a high of $556 a square foot in 2016. As consumers warmed to e-commerce, many retailers have reassessed how much bricks-and-mortar space was necessary, especially in locations where the rents were costly. Many businesses left Soho.

While this downtown neighborhood shows signs of renewed tenant interest, it appears to be coming at the expense of other Manhattan districts. Pinko recently closed two other locations on Madison Ave. and West Broadway to focus on its latest flagship, while Valentino has closed its store on Fifth Avenue.

Write to Esther Fung at esther.fung@wsj.com

(END) Dow Jones Newswires

March 11, 2021 12:30 ET (17:30 GMT)

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