Food and Fashion Tenants Boost Manhattan Retail Leasing
How long that momentum lasts amid higher inflation and slower job growth is anyone’s guess
By Celia Young April 12, 2023 3:57 pm
reprints
Fashion and food tenants helped boost Manhattan’s retail leasing in the first quarter of the year, though activity still remained below pre-pandemic levels, according to a CBRE report.
Combined leasing velocity for the past four quarters reached 2.8 million square feet, a 14.5 percent increase compared to the same period in 2021, according to CBRE (CBRE), which tracks leasing activity in four-quarter chunks.
Asking rents increased 3.7 percent to $638 per square foot from the fourth quarter of 2022 to the first quarter of this year, and tenants are getting closer to paying those prices.
On average, retailers signed deals for 75.5 percent of the rent a landlord asked in the 16 prime Manhattan retail corridors CBRE measured, a 3.1 percent increase from the previous quarter as the number of available spaces shrink in the borough.
“The inventory has been depleted so badly in some of these prime markets that the only spaces that are left are high in price,” said Hiro Imaizumi, CBRE’s field research manager. “I think tenants are trying to do everything they can to secure the last remaining space, even if they have to pay closer to asking.”
Union Square and the Flatiron District saw its combined availability rate drop 46.2 percent quarter-over-quarter to just seven open storefronts, as retailers took 100,956 square feet in the first quarter. Those deals were dominated by clothing stores, including Abercrombie & Fitch’s lease for 6,700 square feet at 139 Fifth Avenue and J. Crew’s 27,000-square-foot renewal at 91 Fifth Avenue.
Fashion retailers also dominated the Plaza District, which saw the second-highest neighborhood leasing volume in Manhattan in the first quarter at 91,789 square feet. Louis Vuitton’s parent company LVMH took 43,500 square feet at 4 East 57th Street and clothing brand Burberry signed on for 14,700 square feet at 693 Fifth Avenue while it renovates its 9 East 57th Street store.
Not to be outdone, SoHo saw a handful of clothing brands ink deals in the neighborhood, with fast fashion brand H&M taking 18,000 square feet at 591 Broadway, Abercrombie & Fitch scoring 9,000 square feet at 547 Broadway, and Piombo opening its first-ever New York City store at 149 Spring Street.
But New Yorkers won’t be eating Vogue instead of dinner. Manhattan also saw strong restaurant leasing, with food and beverage tenants taking 41 deals for nearly 150,000 square feet across the borough in the first quarter.
Those included Aqua Restaurant Group’s lease of 26,000 square feet at 902 Broadway in Union Square, Scores Gentlemen’s Club inking a deal for a 9,000-square-foot sports bar at 416 Eighth Avenue, and SA Hospitality Group’s renewal of its 8,600-square-foot restaurant Casa Lever at 390 Park Avenue.
Because supply chain problems have made it more difficult to get equipment for new eateries, demand for second-generation restaurant space has gone up, Imaizumi said.
“They’re looking for spaces with an existing build out, so all the prime food and beverage spaces in the city have also been leased up, with very few remaining,” Imaizumi said.
Despite the strong leasing in the first quarter, Imaizumi expected deals to slow down in 2023 as rising consumer prices and slower job growth hamper spending, hurting retailers’ bottom lines, Imaizumi said.
“Especially since people have been locked inside for the last two years, people are going out and having fun spending money,” Imaizumi said. “But we don’t know how much longer that’s going to continue, especially with a lot of economic uncertainty.”
Celia Young can be reached at cyoung@commercialobserver.com.
