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Dwelling Depot indicators lease to accumulate over 120,000 sq. ft of Mattress Tub & Past in New York Metropolis

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People wear protective face masks outside Home Depot in Flatiron District as the city resumes Phase 4 reopening after restrictions were imposed in New York City on Aug. 8, 2020 to slow the spread of the coronavirus.

Noam Galai | Getty Images

Home Depot is preparing to expand its Manhattan presence over the next year and take over a huge space that will be vacated by Bed Bath & Beyond.

The hardware store has signed a lease for a Gazit Horizons property in Manhattan's Upper East Side, 410 E. 61st St., that spans four floors and covers more than 120,000 square feet.

Bed Bath & Beyond's current lease expires in 2021. The Home Depot deal is one of the largest retail leases, in terms of size and total annual rent, to be seen in Manhattan in recent years.

According to someone familiar with the terms of the contract, Home Depot pays roughly double the rent that Bed Bath & Beyond paid.

"We signed the lease in April," said Jeff Mooallem, president and CEO of real estate company Gazit Horizons, in an interview. "The biggest problem with the deal was that neither party knew what it would cost to retrofit it. … We both had to do some due diligence to see if the deal was structurally achievable at all."

"Reports of retail deaths in New York City are grossly exaggerated," he added. "Executing this lease at the height of the Covid-19 pandemic is an important sign of confidence in New York."

In the middle of a multi-year turnaround plan, Bed Bath & Beyond has announced that it will close 200 of its eponymous stores over the next two years. It has cleared the locations for around 60 stores that will close by the end of 2020, including the Upper East Side store. It operates a handful of other locations in Manhattan, including on the Upper West Side.

Meanwhile, as in much of the country, the retail property market in New York has been hard hit by the coronavirus pandemic, as tenants have been unable to pay rent or have been forced to vacate properties entirely.

The average asking rent for retail space in New York fell for the 12th consecutive quarter to $ 659 per square foot in the third quarter of 2020, a year-over-year decrease of 12.8%. This is based on data from the commercial real estate service provider CBRE.

Home Depot currently has two locations in New York City, one in the Flatiron neighborhood and one in Midtown.

A Home Depot representative did not immediately respond to CNBC's request for comment.

Both Home Depot and Gazit Horizons, the North American subsidiary of Israel-based Gazit Globe, were represented by commercial real estate services company Ripco.

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Steven Gregory