Beyond SoHo And Fifth Avenue, Tariffs And Closures Rattle NYC Retail

The past year was very good to owners of retail space in New York's hottest shopping districts. But everywhere else, the bite of sweeping tariffs is sinking in.

New Yorkers are experiencing disproportionate cost increases compared to elsewhere in the country due to tariff policies, according to a new report from the Manhattan Chamber of Commerce.

And even as average asking rents for retail space are still rising in some prime corridors — like Fifth and Madison avenues and in SoHo — they are sliding in the majority of others, resulting in questions about whether the health of the city’s overall retail real estate will hold up among economic concerns.

“We are seeing less absorption of space in more local areas, where you have local mom-and-pop operators,” said Robin Abrams, a retail broker and vice chairman at Compass. “Everybody is impacted, but they're more directly affected by it and maybe not as able to take a long-term point of view and deal with it.”

Tariff costs at every step, from construction materials for store buildouts to inventory, have added up to an extra $4.5B bill for the city’s small businesses and an extra 21% to the cost of goods purchased in the state, the chamber found. 

Doing business in NYC always carries a high cost — it had the highest asking rents in the continental U.S. during the fourth quarter, according to Colliers — but tariffs mean even more pressure.

“There is no question that small businesses are feeling the pinch,” said Jessica Walker, president and CEO of the Manhattan Chamber of Commerce. “Tariffs are the No. 1 issue that we hear about.”

Consumer spending has been mimicking the K-shaped recovery seen in the broader economy, with well-off consumers continuing to spend on luxury goods while other earners tighten their belts — signaling that retail real estate’s bifurcation is likely to continue.

Consumer confidence hit its lowest point in a decade last month, driven by increasingly negative sentiments about the economy and the job market. And in the Tri-State area, core inflation in 2025 was half a percentage point above the national average at 3.2%, according to the chamber.  

Challenging economics — whether tariffs, a cold winter impacting foot traffic, or a recession — undoubtedly pile on to the mountain of obstacles NYC’s small businesses face, Cushman & Wakefield Executive Vice Chairman for Retail Services Joanne Podell said.

“It's very hard to run a retail business. I was a retailer many years ago,” she said. “You have to have enough financial strength to get through hard times.”

But Podell said the city’s overall retail sector is healthy: People haven’t curbed their day-to-day spending in grocery stores or cut down on their medical appointments, she said, and the city’s middle and upper classes are still eating out and buying luxury clothing.

“I have never seen more people in restaurants. The city is packed,” she said. “The absorption is the strongest I've seen in many, many years.”

And in spite of initial tariff jitters, rents went up and availability went down in NYC’s premier retail corridors in the second half of 2025, a new Real Estate Board of New York report found. 

Asking rents along Broadway in SoHo rose nearly 50% year-over-year, reaching an average of $726 per SF — a figure more than double its lowest point in 2020 and approaching its 2016 peak of $824 per SF, according to REBNY’s figures.

Fifth Avenue between 49th and 59th streets and Columbus Avenue between 66th and 67th — up 22% and 12%, respectively — were the only other of the 16 corridors REBNY tracks that experienced significant rent growth from 2024. 

Many international retailers expanding to NYC may simply be swallowing the increased costs on the basis that the city is the best expansion ground for their businesses, Abrams said. 

But tenants in renewal negotiations are asking landlords to lower rents because their margins have decreased, she said. Plus, businesses paying a premium for space may no longer be able to support rents in the near future if the economy turns, she said.

“There's a little bit of a disconnect,” she said.

By contrast, landlords are dropping their asking rents in the majority of Manhattan's retail corridors. Average asking rents were down 18% in Herald Square from 2024, down 9% in Times Square and down 8% on the Upper West Side, long the domain of local businesses.

Additionally, vacancies are heavily concentrated in certain neighborhoods: The Financial District, Herald Square, Times Square and Upper Fifth Avenue account for 60% of Manhattan’s available storefronts, as well as most of the retail availability over 10K SF, REBNY found. 

Small and family-run businesses, plus essential services like childcare businesses, could especially “struggle to compete and are less likely to have the ability to fund extensive buildouts,” REBNY noted in its report.

In neighborhoods where small businesses normally plug the gap, landlords are already struggling to fill storefronts, Abrams said. 

“The areas where you're going to get your dry cleaner, and your deli, and your local hardware store — all of those kinds of businesses that have to make money, and are now looking at the challenges to be profitable when they have increased costs,” she said.