🚨Ingka Group (IKEA) paid $213 M ($4,000/SF) for 529 Broadway in SoHo, converting the Nike-anchored flagship into a two-level urban IKEA plus ~28,000 SF of offices above. The acquisition is part of IKEA’s $2.2 B U.S. expansion, signaling conviction in dense urban retail. SoHo’s retail vacancy (~11%) sits below Manhattan’s 13.5% prime corridor average, and rents are up +7.5% YoY, supporting IKEA’s urban bet. Yet underwriting hinges on conservative office rents (~$60s/SF Midtown South) and disciplined leverage, as high basis and 8% financing costs demand strong DSCR.
Acquisition price: $213M, 53,000 SF (~$4,000/SF), September 2025 — [Source: Reuters].
SoHo retail vacancy: 11.0% vs Manhattan prime average 13.5%, Q1 2025 — [Source: The Real Deal].
SoHo asking retail rents: $385/SF, +7.5% YoY, Q1 2025 — [Source: The Real Deal].
Loan Performance. Basis at $4k/SF requires low leverage (<60% LTV). With retail/office debt near 8%, maintaining DSCR >1.4x is crucial. IKEA’s covenant mitigates tenant risk but offices must lease efficiently.
Demand Dynamics. SoHo retail benefits from +6% YoY foot traffic; offices face 17% availability, but boutique space appeals to creative firms. Tenant concessions remain key.
Asset Strategies. Capital plan must allow TI/LC for upper floors. Elevator/MEP modernization required. Separate entrances for office vs retail critical to NOI.
Capital Markets. Trophy retail trades sub-5% caps only for credit anchors. For mixed-use, blended ≥5.5% cap is prudent. IKEA likely funded largely with equity, bypassing lender conservatism on office exposure.
Manhattan prime retail demand is recovering.
Experiential anchors like IKEA lift foot traffic and NOI resilience.
Financing must be conservative given high basis.
Office lease-up remains the execution risk.
🛠 Operator’s Lens
Refi. Avoid early permanent debt; wait for office stabilization.
Value-Add. Budget 10% contingency for office conversion and TI.
Development. Align delivery with 2026’s thin office pipeline.
Lender POV. Retail anchor credit supports structure, but office drag limits proceeds.
IKEA may add more NYC urban formats if SoHo succeeds.
Office leasing trajectory into 2026 will decide NOI.
Cap rate compression in Manhattan (if rates ease) could generate equity upside.
Reuters — IKEA invests $213M in SoHo flagship (Sept 2025). https://www.reuters.com Commercial Observer — IKEA to open new SoHo store with offices above (Sept 2025). https://commercialobserver.com The Real Deal — SoHo retail vacancy and rents (Q1 2025). https://therealdeal.com
