When Annie Havlicek was searching out locations for her first store last year, the womenswear designer was immediately drawn to the Lower East Side's eclectic charm. The area's relatively inexpensive rents, vintage retail tenants, and heavy nightlife scene persuaded her to open a 350-square-foot shop at 154 Orchard St. But in May, after just one year in business, the Chicago native shuttered her boutique.
“There's just not enough foot traffic in that area,” said Ms. Havlicek. “[Stores] are shifting away from it.”
Initially expected to be the next SoHo or West Village, the Lower East Side is getting an F as a shopping destination. Since February, Ms. Havlicek and several other apparel shops, including trendy In God We Trust, have given up on the Lower East Side. Others, such as accessories purveyor Bag and fashion boutique Convent, have announced their imminent closures. Businesses complain that landlords, anticipating completed developments, have been jacking up rents, though several construction projects are still stalled with recession-related woes.


But above all, retailers say the foot traffic, which skyrockets at night, simply does not exist during the day, prime operating time for retail. At the same time, other up-and-coming shopping frontiers, like Williamsburg in Brooklyn, are attracting the same local tenants who are now fleeing downtown's east side.
“Cooler tenants are starting to get a little tired of Manhattan and are looking to explore other neighborhoods, like Williamsburg, as SoHo becomes more and more of a mall,” said Peter Levitan, a managing director at Sierra Realty.
In the past, the Lower East Side, like much of downtown, was a haven for drugs and crime, though it was also a go-to place for inexpensive materials, like leather and fabric, and vintage finds. In the early 1990s, the area began to include more restaurants and bars. With the nightlife came retail pioneers.
“Probably 20 years ago was the first scattered emergence of some frontier-type retailers seeking interesting spaces,” said Steve Rappaport, a managing director at Sinvin Real Estate. “The area was just emerging from the depths of the drug trade.”
Yet such boutiques have never really thrived in the neighborhood, which is still, first and foremost, nightlife-driven. Though many dive bars still exist, they are now joined by more and more chic nightclubs, each boasting its own distinct appeal. Late last year, 10,000-square-foot Beauty & Essex, a swanky club that offers free champagne in its ladies' bathroom, opened up at 146 Essex St., while Hotel Chantelle, a World War II-type bar with a private dance club rumored to only be accessible with a skeleton key, debuted on Ludlow Street.
“The neighborhood is definitely a destination for restaurants and bars, but it's more local traffic during the day and not so much an apparel destination,” said Mr. Levitan.


The influx of nightlife has only driven up rents, making the area even less appealing for emerging boutiques. In the past 18 months, asking prices in the neighborhood have jumped, increasing 20% following recession-related drops. Now, asking rents on prime streets range from $100 to $150 a square foot, while secondary areas are closer to $65 a square foot, according to brokers.
In God We Trust, a seven-year-old apparel and housewares label whose wares are made entirely in New York, was hit with a 25% rent increase—to $150 a square foot—for its 400-square-foot Ludlow Street shop. The company shuttered the outpost in February, and now operates locations only in SoHo, which has enough foot traffic to justify higher rents, Williamsburg and Greenpoint, Brooklyn.


“If I was a landlord, I'd want to fill the block with cool local stores so the foot traffic is cool—we don't need another NoLIta or SoHo,” said Julie Noyce, In God We Trust's general manager. “The Lower East Side has always been for artists and rock 'n' rollers—if you get rid of that local flavor, then it's just Steve Madden and a bunch of bars.”
Some stores leaving the Lower East Side are flocking to Brooklyn. Ms. Havlicek, who wholesales her silk dresses and tops and also sold a collection at Anthropologie, isn't ruling out a future store, possibly in the West Village or Williamsburg.
Already, Williamsburg is home to local shops like Built by Wendy and Sir, as well as newcomer Grand Street Bakery, which sells everything from denim to swimwear. Even mainstream fashion chain Scoop is looking to expand into the neighborhood.