The Manhattan retail market showed continued signs of improvement with high demand and limited availability, which significantly drove up asking rents especially in the most prominent shopping corridors according to The Real Estate Board of New York’s (REBNY’s) Fall 2012 Retail Report.
Prominent retail corridors including Lower Fifth Avenue between 42nd and 49th streets and the Flatiron District performed exceptionally well due to an uptick in consumer confidence and the booming tourism industry in New York City.
The report found that average asking rents on Lower Fifth Avenue, rose 13 percent since the Spring of 2012 to $1,021 per square foot (psf) and 51 percent since the same period in 2011. The Flatiron shopping corridor along Broadway between 14th and 23rd streets also had a significant increase in asking rents with a 27 percent increase to $273 psf since last Spring and a 19 percent increase since last Fall.
Similarly in the Flatiron corridor along Fifth Avenue, asking rents also rose 16 percent to $350 psf since Spring and 25 percent since Fall 2011. “With increased competition for the fewer prime spaces available in key locations, rents in those areas are at all time highs,” said Steven Spinola, REBNY president. “We believe the lack of more prominent spaces on Fifth Avenue between 49th and 59th Streets has led to a softening of the boundaries of this retail corridor. High profile tenants are willing to consider space immediately south along Fifth Avenue which has heavy tourist foot traffic. As the retail corridors evolve and grow our economy gets a positive boost and retailers have new options for growth.”
Three other shopping corridors showing growth in ground floor asking rents in this report period were Broadway and 7th Avenue between 42nd and 47th streets with asking rents up 31 percent to $1,833 psf since Spring 2012; East 57th Street between 5th Avenue and Park Avenue with asking rents up 28 percent to $884 psf since the Spring and; Herald Square corridor as defined by West 34th Street between 5th and 7th avenues saw rents increase 22 percent to $683 psf since the Spring, and a 42 percent increase since Fall 2011.
Overall, asking rents for all space in Manhattan were down four percent to $110 psf due to prime locations in desired areas already being occupied. Asking rent for ground floor space is based on a broad range of factors such as street frontage, depth of store, column spacing, ceiling heights, possible addition of mezzanine or lower level selling space, as well as accessibility to mass transportation. Equally critical, the report says, is whether a location is in an emerging market and if the area can support the increased customer base, which can lead to higher asking rents.
“It is worth noting that all of the data in the REBNY Fall Retail Report was collected before Superstorm Sandy arrived in our area,” continued Spinola. “While some of the retail corridors were in areas impacted by the storm, our advisory group believes in the long-term this will not deter retailers from wanting to open or operate stores in these areas as the strength of the market and the desirability of New York City supersedes any temporary store closings in affected neighborhoods.”