Manhattan Retail Rents Stabilize For First Time In 18 Quarters
Rents stayed stable in some of Manhattan’s busiest retail corridors during Q2 this year for the first time in 18 consecutive quarters.
Manhattan’s retail real estate is showing promising signs of a gradual recovery after years of being trampled by e-commerce followed by the pandemic, according to a new CBRE report. In addition to rent prices stabilizing, availability is down across several of Manhattan’s most sought-after retail corridors.
But the threat of a recession, hesitations around neighborhood selections and a limited pipeline may dampen short-term growth, CBRE found.
Average asking rents across the 16 retail corridors measured stayed at the same price they hit during Q1, $594 per SF. Although asking rents were 3.5% below Q2 2021, overall pricing remained at levels not seen since 2011, according to CBRE.
The Flatiron Broadway corridor recorded the biggest quarterly increase in average asking rents, commanding $392 per SF, up 6.2% quarter-over-quarter and 23.4% year-over-year. The next biggest jumps were on 14th Street in the Meatpacking District, where rents increased by 6.2% quarterly and 13.5% annually.
Of the few corridors to experience a decline in retail rents, CBRE’s report found that Broadway in Downtown’s rents fell 12.9% quarterly and 32.2% annually, to $276 per SF. But retail availability in the corridor also fell during Q2, down 10% quarter-over-quarter and 33.3% year-over-year.
Overall availability declined 2.4% across the 16 corridors from the previous quarter. Yet availability increased along 34th Street in the Herald Square corridor — traditionally one of Manhattan’s prime retail locations — by 81.8% year-over-year and 5.3% quarter-over-quarter. At the same time, the corridor’s rents increased 0.9% from the previous quarter despite the increase in space on offer, reaching $505 per SF.
Aggregate leasing velocity, which measures renewals as well as new leases over the prior four quarters, also recorded increases according to CBRE: up 10% from Q1 and up by 50% from Q2 2021.
Women’s apparel and luxury brands took the largest amount of space, signing 105K SF worth of leases during the quarter, while food and beverage retailers signed the highest number of leases at 16.
SoHo had the highest leasing velocity during the past quarter, recording 59K SF leased in nine deals. Grand Central’s retail corridor also recorded significant leasing velocity, signing 58K SF during the quarter.
Tenant activity remained focused on finding the best locations for their markets, but the report cautioned some may take a step back to consider options or wait for new spaces to become available. Meanwhile, threats of a recession coupled with soaring inflation and major economic stressors, including the war in Ukraine and supply chain delays, may continue to hinder Manhattan retail’s recovery, CBRE warned.
