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Declining Manhattan Retail Rents Attract Retailers’ Interest
May 22, 2019
As retail rents in Manhattan continue to self-correct, REBNY’s bi-annual Manhattan Retail Report found a positive increase in deal-making between property owners and tenants, who are committing to space in key areas. In spring 2019, in 12 of the 17 Manhattan corridors we analyzed, we found that average asking rents for available ground floor retail spaces decreased from the year prior.
Rising consumer spending, income growth and a tight labor market has meant that Manhattan’s top retail corridors are experiencing declining rent values with heightened availability rates. And consequently, those declining rents are creating a healthier leasing environment, with more space being absorbed at a more affordable rate than seen in recent years.
New high-profile development projects increased Manhattan retail inventory through 2018 and early 2019 – such as Hudson Yards, Gansevoort Row, the Seaport District, and Essex Crossing – all of which offer competitive asking rents and elevated visibility.
With these new, prominent retail availabilities, property owners are facing pressure to reprice existing vacant retail spaces at lower asking rents. Ultimately, many owners are offering greater flexibility to prospective tenants in the form of shorter-term deals, concessions, and build-outs.
As was true for 2018, retail leases in the first months of 2019 were driven by the food and beverage industry, activewear, cosmetic, and technology brands. Increased retail leasing activity among e-commerce and digitally native brands are underscoring the importance of brick-and-mortar locations as a physical extension of their marketing presence, in addition to serving as a “distribution hub” for products.
For Upper Fifth Avenue, between 49th and 59th Streets, the average asking rent declined 22 percent from $3,900 per square foot (psf) in spring 2018 to $3,047 psf in spring 2019. This decline, the second steepest on Manhattan’s most prestigious shopping corridor, is due to both historically high availability rates and low absorption rates. The steepest year-over-year decline was on Madison Avenue between 57th and 72nd Streets, where the average asking rent dropped by 25 percent to $1,039 psf from spring 2018.
The largest year-over-year increase in average asking rent was on the 125th Street corridor in Harlem, which saw an increase of 10 percent to $137 psf. New tenants to the corridor include Shake Shack, Whole Foods Market, Victoria’s Secret and Bath & Body Works.
In four of the 17 observed corridors – East 57th Street, between Fifth Avenue and Park Avenue; Broadway and Seventh Avenue, between 42nd and 47th Streets; West 34th Street, between Fifth Avenue and Seventh Avenue; and Broadway, between 17th and 23rd Streets – average asking rents were flat from the year prior.
The Manhattan Retail Report is an overview of the market at a point in time that is based on the available listings of our Manhattan Retail Report Advisory Group and Retail Committee members, which include all the major retail brokers and owners in Manhattan. REBNY would like to thank CBRE, Compass, Colliers International, Cushman & Wakefield Empire State Reality Trust, Newmark Knight Frank, Ripco Real Estate, and RKF for their help in preparing the report.