Next week, the International Council of Shopping Centers (ICSC) kicks off its annual New York City convention, which will be held at the Jacob Javits Center for the first time. As retailers and real estate professionals meet to schmooze, discuss business and close deals, let’s take a look back over the past two years at the activity of retailers in the Manhattan office market.
Since January 2013, almost 66 million square feet of office space has been leased or renewed throughout Manhattan, with 10.3 percent of that space occupied by retailers. A total of 309 office leases were signed by retail companies, accounting for nearly 6.8 million square feet. Retailers have also been on the move, as two-thirds of the office leases were new. Subleases accounted for only 7.7 percent of the retailers’ office leasing activity, slightly below the market average of 8.7 percent over the past two years. The average starting rent for these office leases was $51.41 per square foot, 34 percent less than the current overall Manhattan asking rent.
Midtown was favored the most by retail companies, with 190 office leases signed, led by the Warnaco Group, New York & Company, and Macy’s. The 4.4 million square feet of office space leased by retailers accounts for 64.5 percent of the total square footage leased throughout Manhattan. Midtown also had the highest percentage of renewals, as 41.3 percent of those retailers remained in place. The Fashion District submarket was the most coveted area for office space by retailers over the past two years, accounting for 38.0 percent of Midtown’s leasing activity. The average starting rent for retailers in Midtown was $51.72 per square foot.
Midtown South has been the priciest area for retailers’ office space, as the average starting rent over the past two years was $53.26 per square foot. A total of 101 retail tenants completed office leases in Midtown South, which totaled over 1.7 million square feet. The increasing rents across all five Midtown South submarkets led to less tenants renewing, as renewals equaled only 31.5 percent of the activity.
Downtown was the least-targeted area for retail companies in search of office space, as only 18 leases were signed totaling over 690,000 square feet. The $40.43 per square foot average starting rent has not been enough to lure retailers to Lower Manhattan. Maybe that will change as rents continue to soar in 2015.