“It’s a very different city today than 20 years ago, as far as luxury more than anything,” Jason Pomeranc, co-chairman of Commune Hotels & Resorts, said today on a panel at the Bloomberg Commercial Real Estate Conference in New York.
Capitalization rates, a measure of return on investment that falls as prices rise, on Manhattan retail properties dropped to 4.5 percent in September from 5.6 percent a year earlier, according to Real Capital Analytics Inc. The properties sold for $1,497 a square foot, compared with $496 for office space and $513 for industrial space, the New York-based research firm said.
“There’s a flight to quality for investors,” Laura H. Pomerantz, founding partner of PBS Real Estate LLC, a New York retail consulting firm, said on the panel.
Manhattan’s Flatiron District, the World Trade Center and the financial district area near the New York by Gehry apartment building, as well as Bedford Avenue in Brooklyn’s Williamsburg are becoming new centers for luxury retailers, Pomerantz said. Hermes International (RMS) and other luxury vendors follow boutique hotels, fitness spas and restaurants to emerging neighborhoods, she said on the panel.
“Brands want a cool factor,” Pomerantz said.
New parks, such as the High Line and Hudson River Greenway, have made Manhattan’s Lower West Side a more livable place, said Pomeranc, whose company owns the Thompson and Joie de Vivre hotel brands. Massive projects under construction, such as 1 World Trade Center and Hudson Yards on Midtown’s far west side, will transform other areas, he said.
“Large-scale projects change neighborhoods,” Pomeranc said. “You’ll see a wave of that in 2014, 2015 and 2016. It will change New York.”
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