NYC Retail Stirs Back To Life As Rents Start To Stabilize
Demand for retail space is quickening in New York City, even as rents have stopped dropping and landlords have regained some negotiating power.
In all, out of the 17 major Manhattan retail corridors featured in the Real Estate Board of New York’s retail report released Friday, nine saw average asking rent per SF grow from fall 2021. However, average asking rent is below its pre-pandemic level in every corridor.
“In addition to rents finding some solid ground, lease structures are also normalizing. More property owners are pulling away from the very aggressive incentivized leases with heavy discounts that were prevalent in 2020 and much of 2021,” REBNY's report says. “Brokers noted that a few storefronts are getting offers from multiple tenants. These bidding events are limited to only a few spots, but they are yet another indicator of market momentum.”
Bright spots have begun to emerge across the city, but retail strips that have relied on foot traffic, like Midtown East and Grand Central, have seen a more tempered recovery, while SoHo and Madison Avenue have been among the best-performing.
And while leasing activity might be returning closer to normalcy, staffing issues and dysfunctional supply chains have frustrated build-outs and meant stores have delayed openings in some cases.
In New York City, many new tenants are digital-native brands, operations that don't want to commit to long-term leases and don’t have high credit or aren’t yet proven concepts. While many landlords want to strike creative deals, the banks that hold debt on buildings are still calling the shots in many cases.
As restrictions have lessened and concerns about the pandemic have eased, medical retail, including veterinary clinics, has been a bright spot. Increasingly, direct-to-consumer brands are taking space in physical stores because their ability to run targeted ads has been curtailed, and a physical presence has become a key part of their marketing strategy, Leap co-founder Amish Tolia recently told Bisnow.
“Last year, Apple came out with a pretty big update to their tracking, so now if you go on your iPhone, you open any application, you'll probably notice that they'll ask you upfront, ‘Do you want to share your location data?’" he said on a Bisnow podcast. "That's obviously impacted a lot of the ad targeting capabilities for Facebook, because Facebook was reliant on that data for a long time. So what that has really done is that [now], people are really running back into [brick-and-mortar] retail pretty darn quick.”