Manhattan Retail Market Riding Tailwinds of Strong Tourism and Lower Asking Rents
By Mark Hallum July 25, 2023 4:18 pm
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The Manhattan retail market is making strides thanks to an increase in tourism and lower asking rents enticing tenants to sign deals, according to a new report from the Real Estate Board of New York.
A report on the first half of 2023 from REBNY found that in 10 of the 17 retail corridors examined in Manhattan, lower asking rent was driving a return of retailers with streamlined business models, such as Century 21’s reopening 22 Cortlandt Street with 100,000 square feet or Barnes & Noble’s re-emergence from the pandemic in the Upper East Side with 16,744 square feet at 1556 Third Avenue.
From January to June of this year, asking retail rents were 30 percent below their 2016 peak in 13 of the 17 corridors, according to REBNY.
But landlords are having to give away fewer concessions and asking rents are on the rise as major retailers sign leases for spaces that are smaller than pre-pandemic norms, but large nonetheless, REBNY found.
In addition to enjoying lower the asking rents, most of the retailers driving 2023’s growth have benefited from rising tourism — with the expectation that the city could have up to 70 million annual visitors by 2024 — and local shopping habits rather than any return-to-office trends, according to REBNY’s director of market data and policy, Keith DeCoster.
With about 56 million tourists in the first half of the year, New York City sales tax revenue in fiscal year 2023 reached a total of $7.8 billion, up 15 percent from last year. Madison Avenue and SoHo has been specifically attracting retailers, with office heavy neighborhoods still struggling, DeCoster said.
“The office-dependent corridors are top of mind when you’re talking about lagging corridors,” DeCoster told Commercial Observer. “We’ve done some research on the return to work and office building, and while there has been some improvement in the last several quarters, it’s still below what it was pre-pandemic.”
Retail spaces around Third Avenue, Lexington Avenue and Grand Central have seen lots of vacancies in the first half of the year, DeCoster said. Even big spots on Fifth Avenue and around Times Square have been slow to fill up.
Downtown, things look a bit different. SoHo has been a tight market — with about 30 vacant storefronts a year ago — and the first half of the year saw H&M’s 18,000-square-foot deal at 591 Broadway and Cotton on’s 20,000-square-foot lease at 512 Broadway.
Broadway between Houston and Broome streets in the SoHo neighborhood saw average asking rents dip 9.6 percent over the fall of 2022 to $376 per square foot. But the median asking rent was up over 10 percent to $360 and the lowest was $275, a 22 percent increase over the autumn last year, according to REBNY.
Mark Hallum can be reached at mhallum@commercialobserver.com.
