As the International Council of Shopping Centers (ICSC) National Deal Making Conference kicks off next week in New York, it is important to touch on some of the expensive highlights of the retail real estate market. New York City tourism is at an all-time high with 56.5 million visitors and visitor spending was up $2.2 billion dollars in 2014 with $41 billion dollars spent.
In the 11 retail submarkets tracked by Cushman & Wakefield, eight submarkets had a year-over-year rental rate growth through the third quarter. Of these eight submarkets, four of them had double-digit rent growth—averaging 13.2 percent—as asking rents reached historical highs. The Fifth Avenue submarket between 49th and 60th streets still holds the global title of the most expensive retail submarket with an average rent of just over $3,000 per square foot. Despite these high rents, this submarket only ranks fifth on the list for year-over-year asking rent increases, with an 8.1 percent jump to $3,080 per square foot.
The fourth ranked submarket is Meatpacking, where asking rents grew 12.2 percent to $377 per square foot. This average appears to be a bargain given that asking rents are the second lowest in the 11 retail submarkets with Third Avenue being the least expensive.
The Flatiron retail submarket came in at number three with a 12.4 percent asking rental annual growth rate reaching $454 per square foot. Soho has the second highest rental increase at 13.8 percent, with average asking rents at $535 per square foot. Rental appreciation and recent demand for these two submarkets is due to the live, work, play aspect, as it is predominantly driven by the TAMI (technology, advertising, media, and information services) sector.
The number one-ranked retail submarket is along Fifth Avenue between 42nd and 49th streets, as average asking rents have reached $1,244 per square foot, a 14.3 percent increase within the past year. The major jump in asking rents can be attributed to demand from retailers getting priced out of upper Fifth Avenue.