Rents for retail spaces in Manhattan fall to ‘historic’ lows
It’s a tenant’s market in Manhattan.
The Real Estate Board of New York’s biannual report found that asking retail rents per square foot during the fall of 2020 declined in all 17 of the corridors it tracks in Manhattan, dropping by as much as 25% in the year-ago period. The report called the decreases “historic” and noted that eight areas experienced their lowest price per square foot averages in at least a decade. The areas included such traditional retail hot spots as SoHo and the upper part of Fifth Avenue and Madison Avenue.
“While asking rents dropped significantly, taking rents are reported to be much lower, with some brokers citing average differences between asking and taking rents around 20%,” the report stated. “Increases in retail availabilities and feedback from both tenant and retail brokers indicate that we are in a tenant’s market.”
Here are some highlights from the report.
• In the city’s priciest retail neighborhood — Fifth Avenue from 49th to 59th Streets — the average asking rent fell 8% year-over-year to $2,618 per square foot. But it was down 32% from its peak rent back in spring 2018. Along the less prestigious part of Fifth Avenue, from 42nd to 49th Streets, the average asking rent fell 16% year-over-over to $717 per square foot.
• The average asking rents declined 13% year-over-year to $784 per square foot on Madison Avenue, from 57th to 72th Streets. The lowest asking rent per square foot was $450, a 29% increase from last year.
• Downtown, on Houston Street and Broome Street, the average asking rent plummeted 25% year-over-year, to $367 per square foot. It was down 62% from the area’s peak in spring 2018.
• Eleven corridors have witnessed an increase in available retail space ranging from 6% to 67% since fall 2019, reflecting a substantial slowdown in Manhattan retail transaction volume.
The Real Estate Board said that some property owners are willing to provide tenant improvements and concessions. They are also open to more creative deal making, including shorter lease agreements and percent-of-sales rent offerings in the near-term.
“The current market provides ample opportunity for retailers seeking entrance to the Manhattan market and exemplifies landlords' increased flexibility during these uncertain economic times,” the report said.