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Rents Up, Availabilities Down In Manhattan Retail As Recovery Strengthens

Looking north up Fifth Avenue toward Saks

New York retail landlords experienced a stronger end to the year with higher rents and increased leasing activity, marking the start of a turnaround after years of gloom for the sector.

Average asking rents across Manhattan’s retail corridors hit $615 in the last three months of the year, up 1.2% from the third quarter, according to CBRE. Rents had declined for 18 consecutive quarters before stabilizing in the second quarter and starting to rise in Q3.

Direct ground-floor availabilities ended the year at 222 across the 16 prime retail corridors CBRE tracks, a 16% decrease from the year before, and the sixth quarter that availability has dropped.

“Things are slowly moving in a positive direction for retail,” CBRE Senior Director of Research and Analysis Nicole LaRusso said in an interview. “We saw rents moving up for the second consecutive quarter after a long string of steady rent decline.”

Activity slowed toward the end of the year, however, dropping by 9.7% between Q3 and Q4. Total leasing for 2022, including renewals hit 2.5M SF, according to the brokerage, a nearly 12% increase from 2021.

Retail in the city had been in a period of decline before the pandemic arrived. Large swaths of vacancy have been rife in many parts of the city, and even well-capitalized franchises have been affected — retail chains have declined by 14.4% since 2019, according to a December report by the Center for an Urban Future. 

But after years of rents weakening, retailers are now more inclined to lease space, LaRusso said. A new generation of merchants is opening up shops.

“Foreign concepts are taking space,” she said. “I think there’s been pent-up demand. And if you have a strong concept and you are looking to grow, being in Manhattan is high on the list. The financial terms are better today than they’ve been in a decade.”

The biggest lease of the quarter was Adidas America’s 39K SF renewal at 601 Broadway, followed by Epicurie Boulud’s new lease of 23K SF at One Madison Ave. Other major deals of the quarter included Fly Fish Club, a private dining club that sells membership through non-fungible tokens, which took 12K SF at 141 East Houston St., and Italian luxury retailer LuisaViaRoma’s first international location in a 12K space at 1 Bond St.

Apparel brands took the most space of any tenant type in 2022 with 546K SF, and SoHo was the most active neighborhood, with 269K SF of deals signed there. Chanel leased 9K SF there at 113 Spring St. and Dolce Vita took 3,100 SF at 489 Broadway during the last quarter of the year.

Decreasing availability was most notable in residential parts of the city, with the Upper Madison Avenue retail corridor seeing a nearly 6% drop. The SoHo Broadway area recorded a 42% year-over-year decline in availability. The Fifth Avenue part of the Grand Central corridor, on the contrary, recorded increases in availability, both year-over-year and quarter-over-quarter. 

While the retail market's recovery continued in the fourth quarter, still-not-yet-recovered office usage and tourism, e-commerce adoption and a possible recession are all threatening to weaken the economic outlook for retail.

“While anticipating a moderate recession, I do think that will show up to some extent in consumer spending,” LaRusso said. "I do think retailers are bracing for that."

In New York, unemployment remains at 5.8%, well above the 3% average rate of the rest of the country. Plus, there are concerns further layoffs in the city might shake retailers' faith in the market.

”The locations that rely really heavily on office workers that have struggled the most to recover, a recession could send those areas back a bit more,” LaRusso said. “The retail corridors that are focused on residential have been strong.”

CORRECTION, JAN. 18, 7 P.M. ET: Dolce Vita signed a lease at 489 Broadway. An earlier version of this story misstated the address.

Related Topics: CBRE, Nicole LaRusso, NYC Retail