Increasing Inventory And Tenant Selectivity Causing Retail Rents To Drop, REBNY Report Finds

Courtesy of Douglas Elliman
Faith Hope Consolo

As we approach the nightmarish reflection of mankind’s avarice we call “Black Friday,” it’s important to check up on NYC’s retail market.

According to REBNY’s Fall 2016 Manhattan Retail Report, 2016’s soft retail sales market has caused inventory to increase and asking rents to decline in 11 of Manhattan’s 17 prime retail corridors, and retailers once driven away by record rents are taking as much as they can.

Madison Avenue between East 57th and 72nd streets and Midtown South asking rents around Herald Square both decreased 11% year-over-year, now sitting at $1,433/SF and $745/SF, respectively. Asking rents in SoHo, on Broadway between Houston and Broome streets dropped 9% to $755/SF.

Prices aren’t falling everywhere, however, with price growth on Broadway in the Financial District. Asking rents for the corridor jumped 20% to $369/SF for ground-floor retail space, helped by recent transportation improvements like the WTC Oculus and transportation hub.

REBNY’s Manhattan Retail Report Advisory Group believes the rent changes are part of a natural market correction. The retail market’s been flying high since the 2008 financial crisis, they say, but is finally coming back down to earth.

Retail tenants have become so cost-focused, the report adds, that they’re willing to deprioritize store size and frontage for a great location that meshes with their brand, and look through countless options to find the perfect space. This increased selectivity and patience has also caused rents to drop.

Douglas Elliman retail group chair Faith Hope Consolo (pictured) says she’s seen many of the report’s impressions firsthand, describing Madison Avenue as “playing musical chairs.”

“Tenants recognize now is a good time to swap locations, renegotiate or try to make their dream deal,” she tells Bisnow.

But, demand's still strong, she says, and overall, the market’s healthy.

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