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Spring 2017 Manhattan Retail Report
May 22, 2017
The Manhattan retail leasing market is pushing back against the national retail slowdown. Landlords have become more responsive to the changing retail landscape, positioning their properties in order to entice retailers back into the market. Flexible, creative deal structures, and adjusted asking rents with increased concessions have prompted interest of retailers who have been surveying opportunities while the market has undergone a natural correction.
Our Manhattan Retail Report Advisory Group noted that increased interest from retailers has spread throughout Manhattan, showing that there is confidence in Manhattan retail overall. Interest has not been limited to a few corridors, nor has it been concentrated where new residential development is occurring. This activity throughout Manhattan—among amenable landlords, the borough’s strong retail market fundamentals, more diversity among food tenants, trends among e-commerce retailers opening brick and mortar stores, and continued international retailer interest—have shown that the Manhattan retail environment is too dynamic and should not be included with the pessimistic conjectures about e-commerce’s effect on the future of brick and mortar retailing and struggling suburban shopping centers.
As the market’s natural correction continues, average asking rents per square foot (psf) for ground floor retail space declined year-over-year in 14 of the 17 high profile corridors that the REBNY Manhattan Retail Report surveys bi-annually. The two corridors that fared best in spring 2017 compared to spring 2016, were the Flatiron Fifth Avenue corridor (Fifth Avenue between 14th and 23rd Streets) and the Lower Manhattan corridor (Broadway between Battery Park to Chambers Street). The ground floor retail average asking rent rose 18 percent to $456 psf year-over-year in the Flatiron Fifth Avenue corridor. The average psf asking rent in the Lower Manhattan Broadway corridor increased 11 percent to $362.
Rent declines recorded in 2016 along the SoHo corridor (Broadway between Houston Street and Broome Street) provoked interest from retailers. The ground floor average psf asking rent on the corridor leveled off to $812 in spring 2017, one percent less than spring 2016.
The average psf asking rent in Midtown on Fifth Avenue, between 49th Street and 59th Street, was stable compared to last year dropping by only two percent year-over-year to $3,324.
In contrast, the surplus of available retail spaces on Madison Avenue, between 57th Street and 72nd Street, has been more difficult to absorb and the average retail asking rents on the corridor fell 12 percent year-over-year to $1,446 psf.
We must reiterate that the rents quoted in this report are asking rents for available retail spaces. The physical components and location of a retail space factor greatly into its rental value. Attributes such as street/avenue frontage, ceiling height, and presence of below and above grade space can affect value. Consequently, in corridors with low availability, a high quality retail space coming to market can increase the average and median asking rents greatly. Also, in smaller corridors, a lack of available spaces may lead, in some cases, to adjacent blocks becoming of greater interest to retailers.
Accordingly, we have provided information about the retail rent range as well as asking rent information from six months and 12 months ago to provide a rich statistical context in order to evaluate current market conditions. In addition, we would like to note that the surveyed corridors in this report represent the top tier retail corridors in New York City. Rents on adjoining side streets may lease for considerably less than the locations we are profiling. Lastly, as we have learned in the 17 years 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 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 Manhattan Retail Report Advisory Group and the REBNY Retail Committee members, which include all the major retail brokers and owners in Manhattan.
REBNY’s Manhattan Retail Report Advisory Group includes: Robin Abrams of The Lansco Corporation (soon to be at Eastern Consolidated), Karen Bellantoni of RKF, Benjamin Fox of SCG Retail, Andrew Mandell of Ripco Real Estate Corporation, Andrew Goldberg of CBRE, David A. Green of Colliers International, Joanne Podell of Cushman & Wakefield, Fred Posniak of Empire State Realty Trust, Jeffrey Roseman of Newmark Grubb Knight Frank, Craig Slosberg of Jones Lang LaSalle, and Alan Victor of The Lansco Corporation