Rising Rents, Diminishing Availability In Manhattan’s Retail Corridors
The retail market in Manhattan continues to stabilize as availability shrank and rents rose for another quarter.
Asking rents for retail space in Manhattan's prime corridors rose for the fourth consecutive quarter in the three months ending in June, according to CBRE, while availabilities the brokerage tracks registered at 2.9%.
“Rents have been slowly going down for quarter after quarter, year after year after year,” said Matthew Chmielecki, a senior vice president for CBRE Retail. “And we're finally in a position where they're starting to eke up a bit, almost to the point of plateauing a bit.”
The average asking rent climbed up 1.2% from Q1 this year to reach $645 per SF during the most recent quarter, which is still 42% below the peak recorded in 2014. Taking rents were also up, CBRE found, rising by 330 basis points from Q1 and by 930 basis points from a year ago.
“I think what that shows is that since you're not seeing a monster ricochet off the bottom of rents, you're actually seeing them at a healthy level,” he said.
Landlords are signing long-term deals — without fear of missing out on a new rent spike — while lenders are also satisfied with asking rent levels, he added.
Available spaces across the 16 retail corridors CBRE tracks dropped from 206 to 200 over the quarter, with 17% fewer spaces available than a year ago. Leasing velocity over the previous four quarters slowed, however, by 11% both quarter-over-quarter and year-over-year. CBRE researchers attributed the slowdown to the shrinking levels of available spaces.
Health clubs, along with food and beverage tenants, drove leasing activity in the quarter. Notable transactions included Vital Climbing Gym’s 45K SF lease at Essex Crossing, New York Sports Club’s 22K SF lease at 3 Park Ave. and Lafayette Grand Café & Bakery’s 13K SF renewal for its 380 Lafayette St. space. Overall, health clubs signed 77K SF during the quarter, while food and beverage tenants signed 64K SF.
Demand for luxury goods, along with a solid return of international tourists, added momentum to Manhattan’s retail scene and contributed to low availability in several submarkets. The SoHo Broadway submarket saw a 10% drop in availability from Q1, and a 47.1% drop compared to a year ago.
“If you are going to have a tenant come into the market for the first time, they're probably looking in SoHo, Flatiron. If it's luxury, probably Madison Avenue,” Chmielecki said. “Those are the markets you're seeing supremely tight.”
Just nine retail spaces remain directly available in SoHo, CBRE found. The upshot is that availabilities remain in larger retail corridors, like Broadway on the Upper West Side from 72nd Street to 86th Street.
The tightness will likely spread itself across the remaining spaces during the rest of 2023, Chmielecki said.
“A lot of the best spaces in each market got scooped up,” he said. “Now, you have all these tenants saying, ‘OK, my dream location isn't available anymore. Where can I be now?’”
