In a year where New York City’s retail market continued to soften amidst a sea change in the industry nationally, Times Square outperformed every other submarket in 2017.
“For the moment, the retail apocalypse is on hold,” said Steven Soutendijik, executive managing director of retail services as Cushman & Wakefield, at a conference last week when the firm presented a report on retail in 2017.
The firm reported that New York City experienced a “way stronger” than expected holiday shopping season in 2017, with sales up 5.5 percent year-over-year, exceeding many brokerages estimates by full percentage points.
Cushman & Wakefield attributed some of the uptick to the Hurricane Harvey recovery in Texas, but pointed to consumer confidence levels as the true catalyst.
“People are shopping, for sure,” said Soutendijik. “It’s the highest consumer confidence levels in almost 17 years.”
Food and beverage tenants continued to be a big presence in the retail market, providing the bulk of leasing last year with 218 deals. The number of apparel deals ticked up from the previous year, which Cushman & Wakefield attributed to speciality apparel users and e-users dipping into brick and mortar.
While Soho and the 34th Street corridor had the largest drop in asking rents in 2017 compared to 2016, it was the tourist-laden Times Square corridor that showed the strongest numbers last year.
The availability rate for space in Times Square fell nearly nine percent, dropping from 20 percent to 11.1 percent, and the shopping corridor landed three of the 10 largest deals last year.
Some of the most notable were Sephora’s lease at 1535 Broadway, Lionsgate Entertainment at 11 Times Square, and Line Friends flagship lease at 1515 Broadway.
“Overall, there was a continued softening of the retail market that is clearly trying to find the new normal for rent levels, that will generate velocity and spur tenants who have been sitting on the sidelines to get back in the market,” said Soutendijik.
Flagship leasing has slowed in the last 18 months, as the annual gross rent numbers showed. In 2017, the largest deal was just over $10 million in annual gross rent, while in 2016, there were four deals north of $25 million in annual gross rent.
Total gross annual rent of the ten largest deals in 2017 was down 50 percent from 2016’s number, which hit $111 million.
“Large format retailers have clearly pulled back in 2017 from high profile deals,” said Soutendijik. The firm expects landlords will have to decrease asking rents and improve concessions for tenants in order to bring them back to the market in 2018.