Steve Cuozzo

Steve Cuozzo

Real Estate

West Harlem’s historic corridor is changing fast — and for the better

While the Second Avenue subway extension plans cloud the future of 125th Street east of Madison Avenue, as we recently reported, the central and western blocks of Harlem’s historic crosstown corridor are changing fast — and usually for the better.

New development and investment in older properties are bringing new energy and providing Harlemites more shopping, entertainment and cultural options.

More properties are in play than usual as owners eye big purchase offers. Retail rents are rising as well.

A stroll reveals a boulevard undergoing dramatic transformation — mostly productive but occasionally at the cost of small, longtime merchants.

A nearly finished, 26-story Marriott hotel looms above the long-vacant Victoria Theater site between Adam Clayton Powell and Frederick Douglass boulevards. The Apollo Theater on the same block will create and operate a new performing arts center on the project’s lower floors.

Work is underway to expand the Studio Museum in Harlem at 144 W. 125th St., where demolition has begun for an entire new building designed by David Adjaye in collaboration with Cooper Robertson.

A retail surge recently brought Whole Foods, Victoria’s Secret, Bath & Body Works and others to the Lenox Avenue corner and the block west.

Colliers International Executive Managing Director Eric Yarbro said, “Our general assessment is that Harlem is in a great position right now.”

He said that for retail or office tenants, Harlem is “one of the last bastions of affordability in the five boroughs.”

But “affordability” is becoming more relative. Insomnia Cookies just opened at 17 W. 125th, a tiny Thor Equities property where the asking rent was reportedly $150 per square foot.

Meanwhile, Colliers is “actively working with two big, international-name retailers looking at 125th Street,” Yarbro said.

“They have other sites where the rent is $1,000 a square foot. In Harlem, they might pay $160 a foot, and there’s tremendous pedestrian traffic,” he said.

Ariel Property Advisors Executive Vice President Michael Tortorici said that between five and 10 years ago, the neighborhood retail norm was around $100 per square foot. “Now it’s increasingly frequent to see prices going north of $100,” he said.

In another reflection of rising confidence, Ariel is marketing the remaining 94 years on a 99-year leasehold at 4-14 W. 125th St., a four-story building with 100 feet of valuable sidewalk retail frontage.

The 35,000-square-foot building also comes with 10,000 square feet of unused air rights.

According to the prospectus, the leasehold rent is $617,000 a year and will rise over time under a specified formula. The property “has the potential to generate annual income well in excess of $2 million,” the prospectus says.

Although it is “not a street that trades often,” Tortorici said, Ariel brokered the $26.5 million sale last year of five adjacent buildings at 54-62 W. 125th St. — a longtime vacant eyesore — to the Jay Group, which later secured a $37 million construction loan to develop a handsome new apartment and retail tower. Work is proceeding rapidly.

Yarbro said, “From our perspective, clients are looking at Harlem as a market that has strong upside potential if you’re investing and looking for returns.”

One indicator of strength is the strong leasing at Harlem Center at Lenox and 125th, developed by Forest City Ratner in 2002 and now owned by Brookfield. Asking rents of $50 per square foot can be effectively reduced to about $35 under the city’s Relocation and Employment Assistance Program (REAP), which provides tax credits for companies moving to “target” areas.

On the property sale front, Yarbro said, “We sold the Carver Bank building in February at [four-story] 75 W. 125th for $19.4 million” — $700 a square foot, a Harlem record for an office building with ground-floor retail. (It was $900 a square foot, not including the basement).

Carver is moving its offices to another building nearby, but is keeping its ground-floor retail space under a lease with new owner Gatsby Enterprises.

As for 125th Street’s eastern end, Tortorici believes the MTA and major site owners the Durst Organization and Extell will cooperate to allow development to proceed in tandem with still-uncertain subway plans because “their interests align.”