With rents in New York down on average and more space available, now could be a great time for retailers who are keen to negotiate brick-and-motor store locations in Manhattan — except if a spot on Prince Street in SoHo is on the radar.
According to a new report from commercial real estate firm CBRE Group, lease turnover in Manhattan through the second quarter has suffered eight consecutive quarters of declines, and 15 consecutive quarters of average retail asking rent decreases.
Year over year, the average retail asking rent in 16 of Manhattan’s prime retail corridors declined 10.7% to $615 per square foot, which is down 0.6% quarter over quarter and at the lowest level in over 10 years.
“Opportunistic retailers are taking advantage of the tenant-favorable market conditions, successfully negotiating enhanced tenant improvement allowance, free rent, flexibility on term length and percentage-rent deal structures,” CBRE said. The report later added, “Pricing remains mostly negotiable beyond face asking rents as leasing agencies remain reluctant to quote numbers due to the fear of scaring potential tenants away.”
New York City re-opened on July 1 with Mayor Bill De Blasio lifting all business restrictions following the COVID-19 pandemic.
A stand out is Prince Street in SoHo, which had an increase in average asking rent — one of the only streets to see rent rise — up 13.3% quarter over quarter to $469 a square foot; that’s an increase of 7.4% year over year.
However, on nearby Spring Street, which runs parallel to Prince Street, average rent fell 22.9% to $487 a square foot, the largest decrease of the second quarter. “Ongoing downward repricing of the stagnant inventory continued to push rents to historic low levels,” said CBRE in the report.
That said, in SoHo, the highest leasing velocity rate occurred in the second quarter with 13 deals resulting in 47,000 square feet of space leased, said CBRE. Notably, UK-based luxury jewelry brand Vashi secured a roughly 11,000 square foot space on Greene Street.
Among other neighborhoods, in Times Square, the second largest annual decrease in average rents occurred in the quarter, down 22.5% year over year to $1,277 per square foot, the lowest level since 2011, CBRE said.
But in Midtown’s Plaza District, 32,000 square feet was leased in the quarter, including Ralph Lauren’s 28,000 square foot former flagship being leased to Spanish apparel and accessories brand Mango.
There was still plenty of available space. Upper Madison Avenue, where Manolo Blahnik opened last month, had 55 ground floor availabilities at the end of the second quarter, and on Broadway from Battery Park to Chambers Street, 27 ground floor retail units were available.
The report noted that some fundamentals are improving in the Manhattan market. Local quarterly NYC retail sales were up 1.4% in the last period and that the city’s unemployment rate is improving, CBRE said.
“U.S. consumer spending has been strong throughout, and particularly those who increased their savings amid the pandemic are increasing their spending as more of the economy reopens and widespread vaccinations allow for resumption of more ‘normal’ activity,” the report said. “Today, demand for restaurants and travel-related leisure is surging faster than establishments can match with workers, bringing relief to a hard-hit corner of the labor market.”