This is the tenth year that we have updated our real estate profile of the approximately 42 million square feet of space within the BID borders. The two predominant building types (office and loft structures) account for approximately 37.1 million square feet or 88% of the space. Office structures account for approximately 21 million square feet, and loft buildings for approximately 16 million square feet of space based on the building classifications as reported by the New York City Assessors Office. These classifications, however, do not reflect usage. There is a good deal of office usage in the larger loft type buildings. This appears to be intensifying as several large loft type buildings in the Fashion Center BID have recently been sold to new owners who are seeking traditional office tenants.

Office Vacancy

The market in the Fashion Center can be characterized as a steady market, although the conversion of loft buildings to office space has changed the dynamics of the market. Based on recent industry reports of available space within the BID boundaries, the total space availability in both loft-type and office buildings has declined from 3.32 million square feet to 2.69 million square feet. The overall vacancy rate (both office and loft buildings) has dropped from 12.8% to 11.8%. These recent trends are shown on Exhibit 11. However, the amount of vacancies in the loft buildings have decline substantially. It is down from 1.395,000 square feet to 792,000 square feet. This is more a function of space being taken off the market for possible conversions to other uses opposed to a sign of leasing activity.

Office Rental Rates

Office asking rents have either held steady or increased slightly compared to last year. Side Street Buildings have an average asking price of $23.58 per square foot, while the Avenue Buildings have an average asking price of $33.03 per square foot. It is important to note that asking rents do not necessarily reflect the full status of the marketplace, as a variety of concessions (greater tenant improvement allowance, a period of free rent, etc.) can be part of the overall lease agreement which reduces the effective rent. In this regard, the concessions previously offered are now virtually non-existent.

Retail Rental Rates

The retail space market has fared much better over the past year. The vacancy rate dropped from 10.3% to 8.8% during this period. The mix has also not changed significantly; however, the non-retail frontage continues to decline as more space is dedicated to food, services, and convenience retail uses.

Retail rents in the Fashion Center are subject to great variation depending on the size, frontage, configuration, and of course, location. Overall, retail rents are still quite high. Broadway retail space asking rents range from $125 - $200 per square foot; Seventh Avenue from $150 - $200 per square foot; Eighth Avenue from $95 - $125 per square foot and the side street locations from $40 - $85 per square foot.

While the rents in part of the Fashion Center sound high, they are much less expensive than Herald Square or Times Square, where rents as high as $300 to $350 per square foot are common. However, as our retail analysis indicates, there is plenty of retail potential in the area and some locations such as the Port Authority Terminal, produce significant sales levels, approaching $950 per square foot. This level of productivity can easily sustain rents in excess of $100 per square foot that is prevalent throughout the area. Exhibit 12 summarizes the area retail rents.

Exhibit 12 Fashion Center Retail Rent Levels 2005

Location	Retail Rent Range
Westside of Broadway	$150 - $200 +
Eastside of Broadway	$120 - $160
Westside of 7th Avenue	$175 - $200
Eastside of 7th Avenue	$150 - $195
Avenue of Americas	$130 - $170
8th Avenue	$90 - $125
Side Streets	$40 - $85

Source: Robert B. Pauls LLC

TOP