The record retail rent prices of 2015 couldn’t last forever.
The Real Estate Board of New York’s (REBNY) Manhattan retail report found that a slowing global economy has triggered adjustments in the NYC retail market, stabilizing retail spaces in a number of different corridors and leading to less overall leasing velocity.
“Our report shows that demand for retail real estate in New York City remains fundamentally strong, but is starting to feel the effects from the recent slowdown in the national and global retail marketplace,” said John Banks, president of REBNY.
“The changing economic landscape has not been immediately felt across all Manhattan corridors, but our Manhattan Retail Advisory Group suggests that the next twelve months will be a decisive period in which we may see more asking rent price adjustments with the movement of this market cycle.”
With an increasing number of available options, tenants are taking their time deciding on a space, and proceeding with more caution when making decisions on relocating and expanding, the report found. On the East Side, average asking rent for ground floor retail space along Madison Avenue between 57th and 72nd Streets was $1,644 p/s/f this Spring, a decrease of three percent from the $1,700 p/s/f average in Spring of 2015.
Madison Avenue has struggled with supply issues as the luxury retail market has slowed and exclusive brands have delayed leasing new space due to uncertainty of the state of the market.
That delay has led to more higher-priced as well as lower-priced spaces being brought to market, which together lowered the asking rents slightly.
In SoHo, on the corridor on Broadway between Houston and Broome Streets, average asking rents declined 16 percent from $977 to $824 p/s/f between Spring 2015 and Spring 2016, while in Herald Square, on W. 34th Street between Fifth and Seventh Avenues, average asking rents declined 11 percent, from $1,000 to $890 p/s/f. The report cites the increased supply of lower-priced spaces in the corridor, which were previously unavailable.
However, asking rents for ground floor retail spaces in certain pockets of Manhattan continue to show healthy price growth, especially in areas that have undergone large capital improvements and new developments, according to the Manhattan Retail Advisory Group, a REBNY committee comprised of several top retail brokers.
In the Financial District, which has seen rapid growth in both retail and commercial sectors in recent years, the corridor on Broadway between Battery Park and Chambers Street experienced a 39 percent increase in asking rents for ground floor retail space, going from $234 p/s/f last Spring, to $326 p/s/f in Spring of this year.
The report attributed the uptick to the completion of the Fulton Center transit hub and World Trade Center Transit hub, along with new residential development in the area and in nearby Downtown Brooklyn and South Brooklyn.
In the West Village, on Bleecker Street between 7th Avenue South and Hudson Street, the average asking rent for ground floor retail space increased seven percent, rising from $481 p/s/f in Spring of 2015 to $513 p/s/f in Spring of this year.
In this case, the soft luxury market opened up higher-priced retail spaces, skewing the average asking rent higher.