UPPER EAST SIDE — If you thought it was expensive to shop on Madison Avenue, you should try renting a store there.
The average asking rent for a ground-floor retail space on the tony avenue between East 57th and 72nd streets was almost $1,400 per square foot during fall 2013, according to a report by the Real Estate Board of New York. That was a 42 percent increase compared to fall 2012, the report said.
The sharp increase in rent along Madison Avenue is just one sign of what some are calling tremendous retail growth on the Upper East Side. Rents have also increased along other shopping corridors in the neighborhood, as Downtown brands move uptown and several new, mixed-use developments will provide much-needed large retail spaces in the area, experts said.
“The Upper East Side has experienced incredible growth in retail rents,” said Jill Lovatt, vice president of retail leasing at Massey Knakal. “We’re back above pre-recession levels and have probably the best growth in the city.”
Lovatt, who specializes in Upper East Side properties, attributed the growth to several factors.
“Discretionary income is back. Jobs are coming back. Wall Street is doing well and, of course, tourism continues to be incredible,” she said.
The Upper East Side doesn’t see the same number of tourists as the stretch of Fifth Avenue from 49th to 59th streets, where average asking retail rents climbed above $3,000 per square foot in 2013, according to REBNY. However, Lovatt said that some of that impact is starting to spill over into the lower part of the neighborhood, which is just a short walk away from this prime tourism area.
“Because the rents have gotten so high down low, it has driven tenants to move uptown,” she said.
In 2012, 60 new stores opened along Madison Avenue, according to the Madison Avenue BID, which covers the stretch from East 57th to 86th streets. That number fell to 33 last year, primarily because there were far fewer vacancies to fill, Lovatt said.
Madison Avenue isn’t the only area in the neighborhood that’s doing well. According to a report from Eastern Consolidated, average retail asking rents along East 86th Street have shown steady growth since the fall of 2010, topping out at more than $500 per square foot in 2013.
The report attributed much of the Upper East Side’s retail growth to an increased demand for housing in the neighborhood. The residential real estate market in the area is very strong, with sales prices for studio, two- and three-bedroom apartments all up significantly in the third quarter of 2013, experts said.
“You have this influx of residents, and people need new services,” said Faith Hope Consolo of Douglas Elliman Real Estate. “You need new bakeries, new restaurants, new shops — more of everything.”
Brands that had previously focused their energies Downtown seem to be picking up on this need.
John Varvatos, who has one store in the East Village and one in SoHo, opened a flagship location on Madison Avenue at 66th Street this week. Marc Jacobs will also open a store somewhere on Madison Avenue in the spring of 2014. Madewell, J. Crew's sister brand, will open its first uptown store at Madison Avenue and 84th Street sometime this spring.
In addition, a handful of new mixed-use developments will bring new, large retail spaces to the neighborhood over the next few years.
Most recently, Stillman Development struck a deal for a prime space at the corner of 86th Street and Lexington Avenue. It plans to build a 210,000 square-foot high rise on the site, the first four floors of which will be reserved for retail, according to The Real Deal.
The Upper East Side is not the only neighborhood seeing growth in retail, as SoHo, Downtown and Fifth Avenue in Midtown are all booming, said REBNY senior vice president Mike Slattery.
He said that the Upper East Side looks poised for even more retail growth.
“When an area is hot, people want to come into the market,” Slattery said. “That can really make a difference in the prices.”