Leasing Falls, Availability Rises Again As Manhattan's Retail Market Searches For Bottom
New York City's prime retail properties suffered another brutal three months at the start of the year, with hopes now that the vaccine rollout and returning residents will help turn the sector around.
Direct ground-floor availabilities in the major Manhattan retail corridors reached a new high, hitting 275, according to CBRE data. That figure marks a 21.7% jump year-over-year, with Upper Madison Avenue the worst-hit area. The once-glorious retail stretch saw seven new spaces added, an 11% jump on the year before, meaning there are now 53 spots available there.
On Fifth Avenue in Flatiron, the number of availabilities has doubled over the last year, with more potentially looming as several tenants there have lease expirations on the horizon amid a highly competitive market for tenants.
Leasing activity decreased for the seventh quarter in a row, and rents continued to fall while the few tenants on the market continued to score free rent, flexible arrangements, improvement allowances and percentage rent deals.
Overall, the average asking rent dropped for the 14th quarter in a row to hit $618 per SF, marking a more than 13% fall from last year and the lowest in a decade. For the available spaces, the average asking rent is down 20% year-over-year, now at $533 per SF.
SoHo’s Prince Street rents fell 40% from the first quarter of last year to hit $414 per SF, the worst drop across the borough. Meanwhile, Washington Street in Meatpacking experienced a 28% decline in average rents, with asking prices now at $413 per SF. Times Square, with Broadway closed and tourists still absent from the city, had a more than 21% drop in rents, with the average now sitting at $1,293 per SF, its lowest level since 2010.
The four-quarter aggregate leasing velocity hit 1.5M SF, the lowest rate since 2014. Overall, leasing volume for Q1 was down a whopping 58% from the same period in 2020.
CBRE's researchers wrote they believe the quarter will mark the “nadir of leasing” as a few bright spots have emerged and tenants have been encouraged to sign deals in light of favorable conditions.
Cartier took over 9K SF for a new space at 102 Greene St., while luggage manufacturer Tumi took more than 9K SF at 513 Broadway. New York City steakhouse Delmonico’s leased 14K SF at 510 West 42nd St., while eastern Mediterranean restaurant Pera Mediterranean Brasserie said it will renew its 6K SF lease at 60 East 42nd St.
Around 1 in 4 New Yorkers are now fully vaccinated, Gov. Andrew Cuomo announced over the weekend, with the shots now available to all residents over 16. Those increasing numbers, alongside fresh funding from the federal and state governments, are expected to quicken the city’s return to normality.
However, new tax increases on wealthy residents have renewed fears thatt fewer people will return to New York, and few companies have brought the employees back full time, which is expected to have lasting effects on local businesses.