By Sabina Mollot
As Manhattan’s retail market has continued to try and right itself in a period of correction, asking rents have dropped across the borough in 11 of 17 major corridors, a new report has found.
The Real Estate Board of New York (REBNY), who authored the report, released on November 27, said this is a continuation of a multi-year market correction. High asking rents continue to drop, which has resulted in an uptick in year-over-year leasing activity.
REBNY’s Manhattan Retail Report Advisory Group advised that the “experiential” trend appears to be here to stay with retailers are getting creative in their brick-and-mortar spaces.
“As traditional storefront retail leases dip, retailers are emphasizing unique, in-person experiences such as pop-ups and promotional spaces to complement online and marketing efforts,” REBNY said.
The report also found that retailers are creating daytime co-working spaces and bookstore cafés to create modern storefronts to satisfy new consumer demand.
“Our report found that declining rents present opportunities for a growing number of pop-up and experiential storefronts. Prospective long-term tenants remain selective, yet activity continues to be strong in today’s market,” said James Whelan, REBNY president.
The report also included stats on different neighborhoods:
In SoHo on Broadway (between Houston and Broome Streets), average asking rents declined 12 percent year-over-year to $491 psf. The area is witnessing increased pop-up activity and digitally native brands experimenting with retail space as rents adjust from the post-recession period, when rents nearly doubled to historic peaks. Complications in the area stem from restrictive zoning that limits food/beverage uses in the corridor as well as its composition of loft buildings with large retail spaces that are difficult to subdivide.
Asking rents on Columbus Avenue between 66th and 79th Streets remained flat year-over-year at $298 psf. Columbus Avenue is a self-contained, tight market with low availability and it is viewed as a destination for branded retailers and smaller storefronts alike due to high residential foot traffic.
In Lower Fifth Avenue between 42nd and 49th Streets, asking rents declined nine percent year-over-year to $852 psf. REBNY attributes this drop to an increased amount of available spaces, with high-end apparel leaving the corridor in favor of emerging downtown strips. Upper Fifth Avenue between 49th and 59th Streets also experienced a five percent year-over-year decline to $2,838 psf. Asking rents are expected to continue to decrease.
On West 34th Street between Fifth and Seventh Avenue, average asking rents declined eight percent year-over-year to $528 psf. By contrast, asking rents in Times Square on Broadway and Seventh Avenue (between 42nd and 47th Streets) increased two percent year-over-year to $1,889. Herald Square represents a more challenging retail environment than Times Square, though, despite recent closings, the outlook in Herald Square remains positive with new recent leases.
On East 86th Street between Lexington and Second Avenues, average asking rents declined 11 percent to $327 psf due to a lack of available prime retail space. Asking rents had recently inflated artificially due to prominent leases from Old Navy and JP Morgan Chase, with the market now correcting itself.
Comptroller Scott Stringer also issued a report in October, that studied retail trends for one decade from 2007-2017. In that time, he found that citywide, rents increased by 22 percent while vacancies also rose by 50 percent. Manhattan’s vacancy rate was consistently below the citywide average, although it rose from 3.3 percent in 2007 to 5.2 percent in 2017.
The report also follows a study released by the city in August that showed where retail blight existed in the city, rent was not the only factor, with problems ranging from zoning restrictions to lack of access to transit creating retail deserts. However, the city found that the situation was not a citywide crisis.