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Spring 2015 Retail Report
May 18, 2015
The Manhattan retail leasing market saw continued interest in store space through the first quarter of 2015. The stable market conditions have led owners and perspective tenants to see the market with more clarity and have provided a better definition of a spaces’ value. The Spring 2015 REBNY Retail Report showed ground floor asking rents increasing in all but one of the corridors surveyed, year over year. The market remains active though with both major domestically based and international brands doing deals and looking for space in the city despite the recent rise of the dollar.
The average ground floor asking rent for New York’s traditionally most expensive corridor, 5th Avenue between 49th and 59th Streets, increased a modest 4 percent from the Spring 2014 Retail Report to $3,683. Asking rents on the ground floor in Times Square between 42nd and 47th were similarly stable when compared to last spring. The average asking rent in bowtie area increased less than 1 percent to $2,413 per square foot. Asking rents on the ground on Madison Avenue were steady as well with the average asking rent per square foot increasing by three percent compared to last spring to $1700.
The average asking rent of ground floor retail space on East 86th between Lexington and 2nd Ave has continued to ascend this spring to $456 per square foot. This corridor has undergone a successful retail transformation and still has potential for further growth, according to our Advisory Group. Residential development before the recession helped spark the growth in the area and now new luxury buildings at 60 East 86thand 147-151 East 86thare looking to increase the area’s desirability. Retail in the corridor will benefit from the growing number of residents as these buildings are to have larger units more conducive to growing families. Furthermore, the corridor is the main route between museum row and the Lexington line, resulting in constant foot traffic even when the residents of the area are at work and school.
Ground floor average asking rents in Meatpacking District on 14th street between 9th and 10thAvenue increased 10 percent over Spring 2014 to $372 per square foot. Rents along this particular corridor have remained robust despite several other corridors in this immediate area gaining appeal. The popularity of Chelsea Market and The High Line has led to more foot traffic in the area. Foot traffic from nearby offices that are home to a large segment of the city’s burgeoning tech industry has the same impact. This is good for the area in general, but leads to an increased supply of retail space having a tempering effect on individual corridors.
The economic circumstances that support retail activity in the city are very strong. The April release of the University of Michigan Consumer Sentiment Index, a longstanding respected survey intended to convey the propensity of consumers to spend, shows consumers are upbeat. The April release shows the measure is at its second highest level since the end of recession. Consumer sentiment levels this high have not been reached since 2007. Local job growth is also supporting retail the retail sector. New York City private employment has grown 3 percent in the 12 months since March 2014, and construction employment has grown close to 14 percent during the period. In terms of international consumer demand, the city has never had more international visitors. The city had 12.2 million international visitors last year, eclipsing last year’s record by 1.3 million visitors. Furthermore, recent data released from PKF Consulting shows the flow of tourists to NYC has continued into 2015. According to their March survey the average occupancy rate of hotels in the city is 2.1% greater than in March 2014.
We must reiterate that the rents quoted in the report are asking rents. Also, please note that the physical components of a retail space factor greatly into its rental value. Attributes such as street/avenue frontage, ceiling height, presence of below and above grade space can affect value as well as locational factors. Consequently, in corridors with fewer availabilities, a high quality space coming to market can increase the average and median asking rents greatly. Also, in smaller corridors, a lack of available space may lead its adjacent blocks becoming of interest to retailers. Accordingly, we have provided information about the rent range as well as asking rent information from six months and 12 months ago to provide a rich statistical context to evaluate the current market conditions. In addition, we would like to note that the surveyed corridors in the report represent the top tier retail corridors in the city and that rents on adjoining side streets may lease for considerably less than the locations we are profiling. Lastly, as we have learned in the decade or more that we have been preparing this report, retail brokers active in the market are an invaluable source of information and trends that cannot be fully captured completely by the numbers in our report. We attempt to provide an overview of the market at a particular point in time that is based on the available listings of our Advisory Group and the REBNY Retail Committee members which include all the major retail brokers and owners in Manhattan.