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NYC Retail Rents Down 9% As Pandemic Upends Business

New York City still isn't totally open for business.

The challenged retail sector in New York City slid again during the first quarter of the year, as businesses began to assess how the coronavirus pandemic's remarkable circumstances will turn their operations upside down.

Leasing volume in Manhattan hit just below 3.6M SF during the first quarter, a continuation of a downward trend, according to CBRE’s first-quarter retail report, although 2020 was up from the level of activity in Q1 2018.

Average asking rent in the borough fell to $714 per SF, a 9% decrease from the same period last year, and it was the 10th quarter in a row with a rent decline. Along Broadway in SoHo, average asking rents dropped 30% year-over-year to hit an average of $420 per SF. On 34th Street in Herald Square, rents dropped to $500 per SF, and Times Square rents fell nearly 16% to $1,647 per SF.

“Many retailers are in survival mode, taking action to shore up their online, take-out and home-delivery sales channels as they hope to ride out the virus-induced disruption and hold on until the economy begins to recover,” CBRE notes in the report.

Retail rents on Washington Street in the Meatpacking District, around which tech companies continue to cluster their offices, rose 15% to hit $575 per SF. Gansevoort, Little West 12th and 13th Streets saw a 3% year-over-year jump in average asking rents to hit $376 per SF.

Across Manhattan’s 16 major shopping corridors, there were 226 direct ground-floor availabilities, up from 219 from the quarter before. Upper Madison Avenue had the biggest jump in availability, per the report, with four new listings at 600 Madison hitting the market.

Broadway in Lower Manhattan saw availability increase 44% over the last year with 26 ground-floor spaces becoming empty in the first quarter.

Retailer Lane Bryant locked down a 7,600 SF lease at 1 West 34th St., and a new tenant moved into Empire State Building space previously occupied by Heartland Brewery. SoHo had 27K SF leased in five separate deals, including Pacific Sunwear of California taking 10K SF in a seven-month pop-up lease at 503 Broadway. In the Plaza District, French brasserie and steakhouse Boucherie leased 11K SF at 1325 Sixth Ave.

Retailers, landlords and brokers were already dealing with a fast-changing retail market in the city before the pandemic set in. The amount of vacant retail space doubled in the city between 2007 and 2017, and there have been several high-profile bankruptcies within the last year.

Modell’s Sporting Goods announced plans to close all its stores last month, NYC grocery chain Fairway Market filed for Chapter 11 bankruptcy earlier this year. Barney’s went bankrupt in August before liquidating in February.

As lockdowns across the country persist, many retailers have stopped paying rent writ large, including The Cheesecake Factory, H&M and Staples.

“On the retail side, some [tenants] are just not paying rent at all," Marx Realty CEO Craig Deitelzweig told Bisnow this week. "And the bigger they are, the more likely they are to not pay rent, just because they think they can.”