Manhattan Retail Rents Drop For Eighth Straight Quarter
Retail rents in Manhattan have declined again, as the impact of retail’s new world order spreads across the city.
Average asking rents across the borough fell by almost 6% to hit $756 per SF this summer, according to CBRE's third-quarter report, released Wednesday. It was the eighth quarter in a row with a rental rate decline.
Most of the retail corridors that CBRE tracks saw asking rent declines, with 11 out of 16 areas recording a decline over the last year. The corridor that took the biggest hit this past quarter was Fifth Avenue in Flatiron, where rents fell a whopping 20% year over year to reach $346 per SF. Upper Madison Avenue’s average rent was knocked down 16% from $1,148 per SF to $954 per SF.
That decline marks the first time rents in that stretch have fallen below $1K per SF since 2011, though the report notes buildings 635 Madison and 793 Madison saw significant leasing activity at lower rents, contributing to the decline. Meanwhile, rents along SoHo’s Broadway strip dropped to $486 per SF, an almost 15% decrease.
Leasing velocity reached 3.7M SF in the borough, a slowdown on the quarter before but more than the same time period in both 2018 and 2017.
There has been a string of sobering news for retail for some time now, both in the city and around the world.
A report from New York City Comptroller Scott Stringer's office last month found that between 2007 and 2017, the amount of vacant retail space in the city went from 5.6M SF to over 11.8M SF. Meanwhile, bankruptcies and store closures dominate the headlines. Barney’s for example, reportedly is about to lay off 800 employees in New York as bidders circle to buy the retailer after it filed for bankruptcy in August.
Overall, ground-floor availability declined in the quarter, but some individual corridors experienced increases. On Upper Madison Avenue, the number of ground-floor spaces on the market increased from 34 to 38 over the last 12 months. Vacancy on Broadway in Lower Manhattan also grew.
However, amid the seemingly grim news, the report pointed to the overall health of the city’s economy, increasing retail sales and strong tourism numbers.
AMC Theatres' renewal for 95K SF at 304 West 34th St. was the biggest lease of the quarter, followed by Whole Foods Market, which leased 60K SF at 63 Madison Ave. in NoMad, and Ulta Beauty inked a deal for 21K SF at 2 Herald Square. Food and beverage, which has been considered a bright spot in the retail leasing market, was the most active segment of the quarter.