The dragging recession is leading to lucrative leasing opportunities that are opening long-closed
windows for mall and independent retailer across the city . For retailers already in place,  if they've got good credit, landlords are offering incentives and packages, including cash, to keep them in their buildings.

"The market has changed; it's no longer a landlord market" says Cushman & Wakefield's Joanne Podell, who says landlord are partnering with tenants in order to keep everybody in business.

There is no doubt about New York's retail capital status.  Just as the catwalk serves as the runway for fashion, so too does New York City provide the nation with a showcase location for shopping. The necessity of presence here became more clear just over a year ago in Spring 2008 as per-square-foot rents rose to as high as $2,000 along portions of tony Fifth Avenue in Midtown. Otherwise-heeled neighborhoods saw new height too, for example, the Meatpacking District at $460 per square foot and Broadway from 72nd to 86th Street at $400 per square foot.

But, as the economy stalls and retail sales plummet, landlord and tenants - ranging from high-profile Fifth Avenue names to lesser known corner shops that give New York flavor - are all in a period of adjustment. "The downturn has left a lot of landlords adjusting their expectations when dealing with tenants," says Ariel Shuster, senior vice president at Robert K. Fuuerman & Associates.  He says landlords are offering things the retail market has not seen in years including cash allowances to build up space, longer rent period and an openness to food establishments that would've been in the past.

"Some of the deals recently structured include lower rent in the first year or two, then a bigger increase in the third or fourth year," Schuster says. "It's a move to help the tenant get over the bump."

Some retailers are faring better than others, he says. "Stores like Staples are doing well; supermarkets, fast food restaurants, mid-tier apparel and things that New Yorkers need, like drugstores, are all doing okay," says Schuster.  He adds that pet supply stores and even gyms are still doing good business because ultimately, people want to feel good about themselves.

Still, the numbers reveal increasingly tight wallets and pocketbooks. For example, despite the holiday season's standing as retail's time to shine, by last December the number of New Yorkers employed in the retail trade sector had fallen by 1.4% from 315,300 to 310,800 according to data from the New York City Economic Development Corp. NYCEDC's February monthly retail sales figures were 8.6% less than a year earlier.

Not a lot of retail tenants are expanding or looking to open multiple locations at this time," says Scott Klatsky, director of retail leasing at Time Equities Properties. "The name of the game is retention, retention, retention."

Over the past year, retail asking rents fell by around 20% to 30%, probably going even lower, according to Henry Goldfarb, executive managing director of Grubb & Ellis' New York retail group. Nonetheless, he says, the main thing is that "the retail real estate market, like all real estate sectors, is revaluing the structure they were in." This means a chance to work with the smaller guys who might have been looking to get into the market, but didn't have the opportunity before.

Klatsky agrees, saying that "lots of retailers who've been on the sidelines waiting can expand  now." He adds that a lot of smaller retailers who weren't looking initially have opportunities now to "come in and sign on for some nice long-term leases."

Manhattan's Union Square appears to contradict news of downward spirals. There, one finds crowds with bags in tow as they make their way from places like Whole Foods to Diesel. "The area is a haven for some of the nation's top retailers, some of the top producing," says Faith Hope Consolo, chair retail leasing and sales at Prudential Douglas Elliman.

Consolo says Union Square is a neighborhood where regardless of income, people can shop for product ranging in price from $5 to $5,000. She says that while consumers have retreated a bit because of recession related concerns, they're still shopping on eRay. By the third quarter, Consolo predicts, "They'll be ready to return to the bricks and mortar, since that's where the excitement is."

Contained within the brick and mortar of retail are the often exciting interiors designed and built by companies like Mackenzie Keck Construction. Its clients include Theory NYC, Anthropologie and Abercrombie & Fitch.

Although he says some luxury brands are somewhat insulated, Vikram Reddi, president of Mackenzie Keck, calls the current economic situation challenging to everyone. He speaks to New York's international appeal, noting that if you mill about any of the Fifth Avenue flagships, you will hear many different languages.

"We're finding that some of our clients are looking at outlet venues or factory shops," he says. "We're also seeing some of our US clients cut back dramatically on their domestic work and looking instead to Canada and even more so, Europe."

He says his company is enthusiastic about a yet unannounced LEED Gold retail project in New York, but most of Mackenzie Keck's recent work has been overseas. Here at home, Reddi says the retail community has been excited by a new entry from across the pond, Top Shop, the London retailer scheduled to debut in Soho in April.

Cosnolo says "we're all anxiously awaiting" the 50,000-square-foot store Top Shop's opening at 478 Broadway.  "That is a big, big entrance into our markets." She adds that she and her company are already in talks with Top Shop about other locations throughout the city.

Among recent deals and opening Consolo cities are 609 Madison Ave, which will reemerge as Lalique; the Armani store at 717 Fifth Ave.; Diesel and its largest store ever at 685 Fifth Ave.; and Spa Chakra at 633 Fifth Ave.  She says Tumi and MAC have plans near for locations near Grand Central Terminal, while the Meatpacking District has welcomed Matthew Williamson's new store at 415 W. 14th St., Ports 1961 at 3 Ninth Ave. and Vince at the corner of Washington and Little W. 12th streets.  In Soho, NYC Timberland opened at 474 Broadway and Madewell at 478 Broadway, while Escada has plans for 560 Broadway, replacing Ann Taylor.

But perhaps Consolos most intriguing potential revelation may show up in Union Square, as speculation increases over what will fill the large spaces left behind by the Virgin Megastore and Circuit City.  A Super Best Buy may take one of the big-box spaces, and even Wal-Mart was floated as a possibility.

Until this year, electronics were seen as safe among the retail community.  For example, Heritage Realty president and CEO George Constantin says his company had bought 420 Fifth Ave. in 2004.  At the time, electronics giant CompUSA occupied around 68,000 square feet of the buildings space. He says the location was CompUSA's number one grossing store.

The space has been vacant since CompUSA cease operations early last year, and Constantin is looking for someone to take it.  So far, he's been getting interest from smaller tenants.

"We had entered a deal with Fortunoff, but the filed bankruptcy," Constantin says, adding that he and his partners are hesitant about dividing the space.  "Where can you find 74,000 square feet in a big blocks on Fifth Avenue?  MY dream tenant would be Dell or an Apple."  He says he's met with a few people from Microsoft as well, noting that the computer maker is looking to expand into retail.

Constantin calls retailers with service oriented or high quality products, the magic formula.  He says that many higher-priced retailers are realizing that consumers are willing to travel to destination areas for some of their products.

Then there are staples products that consumers always need and tend to purchase in locations more convenient for them.  "People still have to eat, shower and shampoo their hair," says Podell, senior director at C&W.  "Products like makeup, small items like lipstick - items that women can take with them and are not a huge investment - are still selling."

Still, some retailers that carry the necessaries like soap are seeking the formula that gives them an edge as they compete for lipstick and shampoo market.  Take the New York institute Duane Reade.  "We were told that Duane Reade was starting a new concept or prototype store," says Fred Posniak, senior vice president at W&M Properties.

Thanks to new management, Duane Reade has been slowly rolling out a new, more spacious, neater and modern stores replete with a new more upscale appearing logo.  With W&M, "They wanted to do a multi-level branch with us with the total area at around 14,000 square feet," says Posniak.

The retail space at 1350 Broadway was split, with Sovereign Bank taking a corner in the building and Duane Reade the rest.  "It has a nice presence on the ground, and there will be an escalator and elevator going up to the second floor, which will overlook Herald Square," Posniak says.

The Duane Reade deal may reflect the times. "Some of the best leases were done in slow economies," Posniak says.  "If you are looking for long-term, now is the time to be leasing, because rents are obviously down."

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