The Real Estate Board of New York (REBNY), the city’s leading association for the real estate trade, today announced that asking retail rental rates in Manhattan have dropped in 16 of 17 registered corridors as the market continues to correct more than a year after COVID. -19 pandemic hit New York for the first time.
According to REBNY’s Spring 2021 Retail Manhattan Report (attached), the average asking price per square foot (PPSF) of rents across all Manhattan shopping corridors fell as much as 37% over the same period last year. Corridors located in areas with a strong residential base tend to experience less recession than corridors relying on tourists and office workers. For example, since the spring of 2019, the average asking rent on the Upper East Side has decreased by 15% compared to the Madison Avenue and Fifth Avenue corridors, which saw a more than 25% decline in the same time period.
The new results show that the current market – with increased availability and lower rental costs – provides unique opportunities for both tenants and owners. At the same time, the data also points to the importance of ensuring that office workers return to their jobs, and the City is doing more to attract tourists to New York in order to create pedestrian traffic that supports the retail business.
This trend is not typical of the Manhattan retail market. REBNY’s Winter 2021 Brooklyn Retailing Report shows that in 12 of Brooklyn’s 17 shopping corridors between winter 2020 and winter 2021, average asking rent fell from 5% to 48%. However, industry leaders reported an increase in retail leasing activity in the fourth quarter of 2020 and the first quarter of 2021, highlighting how retail tenants are seizing the opportunities presented in the current market.
“The adjustments in the retail market over the past year are opening up new opportunities for the industry, from bringing new retailers to market to using creative leases and lease concessions,” said REBNY President James Whelan. “Now that COVID-19 restrictions are eased and the city is reviving, there is a real sense of optimism that we will see an accelerated recovery in the retail market in the coming months.”
Reducing rents opens up new opportunities. This is why retail leaders are reporting growing interest and demand from retail tenants and commercial brokers who are showing increasing confidence in the market recovery. REBNY Broker Confidence Index for Q1 2021as COVID-19 restrictions are eased as New York City has reached the 70 percent vaccination threshold.
“The retail market is entering a very exciting time after a long unexpected hiatus,” said Jeffrey Roseman, vice chairman of Newmark Knight Frank Retail. “The combination of profitable rental rates, a multitude of creative new retailers and restaurants, and a real pent-up demand for people looking to go shopping will bode very well for the New York retail market.”
“There has been a significant increase in business activity among local, national and global tenants, and all of them understand that now is a great time to lock in favorable leases,” said Robin Abrams, vice president of Compass.
“Over the past year or so, local tenants have been able to ‘exchange’ and rent larger or better areas in their districts at a lower price, or similar areas at lower prices. Brands that already have stores, as well as brands with digital technologies, were interested in renting space at an attractive rate with more creative and flexible deal terms. Some property owners have entered into a number of transactions in a way that prompted tenants to commit themselves. These incentives included flexible lease terms covering short-term leases, many with renewals, or, to a lesser extent, long-term deals with some exit potential with some penalty and / or tied to sales figures. Landlords also considered a lower starting rent, often combined with a percentage rent, with a rent or rent increase to protect them in future years. These less stringent deal structures allow tenants to test the market and minimize risk. ”
The REBNY Manhattan Retail Annual Report is a collaborative effort between the REBNY Manhattan Retail Advisory Group and the REBNY team. The report provides a snapshot of the main shopping corridors in the area based on the available ground floor rent information. All data is obtained from the respective firms of each member of the REBNY Manhattan Retail Advisory Group. The report includes the average price per square foot, median price per square foot, lowest price per square foot, and highest price per square foot for each of 17 monitored trade corridors.
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