Manhattan Retail Rents Down 2.7%
Rents at Manhattan retail spaces have dropped amid a barrage of headwinds in the sector, although relative to rents from a few years ago — and compared to markets around the world — they remain high.
Average retail rents in Manhattan dropped by 2.7% over the last 12 months, but that represents a small blip compared to the 90% increase in retail rents the island saw between 2012 and 2014, according to a CBRE report. Increased supply, as massive construction projects all over Manhattan brought up rental availability by 24.4%, rather than significant changes in demand, drove down average rents, the researchers say.
Fundamental economic statistics for retail in Manhattan are strong. Regional unemployment is near historic lows at 4.3% with 342,000 employed in retail across the city. New York's gross regional product increased by 4.1% from last year to $1.2 trillion. Total citywide brick-and-mortar retail sales were up 2.1% from the previous year to $134.2B.
Discount retailers Marshalls, Nordstrom Rack and Target signed three of the top five leases last quarter, while Whole Foods signed the second-largest retail deal to start a new store at 5 Manhattan West.
Retail rents either dropped or remained flat over Q1 2017 in 15 of the 16 Manhattan retail corridors CBRE tracked. The exceptional corridor was Downtown Broadway, from Battery Park to Chambers Street, where rents driven by the booming local economy increased by nearly 10% to $419/SF from $351/SF.
At the same time, SoHo's Spring Street corridor, between Broadway and West Broadway, saw the largest percentage rental drop: 12% from $1,018/SF to $896/SF.
SoHo, known as a center for fashion and apparel, has had the largest year-over-year rental drops, on Broadway from Houston to Broome, Prince Street from Broadway to West Broadway and Spring Street from Broadway to West Broadway saw rents drop by 15%, 14.1% and 14.6%, respectively.
Despite the rental drops, CBRE believes SoHo is still well-positioned. Smorgasburg, the popular food market attracting 20,000 to 30,000 people to Williamsburg, Brooklyn each weekend, is opening a new location on Varick Street this summer, and SoHo continues its reputation as a shopping mecca for international tourists interested in fashion.
