Newcomers to Manhattan Retail Market Dominate Leasing Momentum
By Mark Hallum March 12, 2024 12:28 pm
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Retail leasing in some of the best shopping corridors in Manhattan is hitting capacity, and that can only be good for the market in the surrounding neighborhoods.
While generous concessions to tenants — such as flexible lease terms and up to six months of free rent — are still major factors cutting into landlords’ bottom lines, the reality is that the demand has only gained momentum coming out of the pandemic, according to CBRE.
And dominating the upward trend between 2020 and 2023 has been retailers entering the New York City market for the first time. More than 1.56 million square feet of all new leases being signed by retailers are either from suburban markets or making their debut altogether.
In 2023 alone, retailers debuting in Manhattan leased more than 455,000 square feet, equal to about 18 percent of Manhattan’s annual leasing volume, according to CBRE (CBRE).
“I think there’s still some markets where there are plenty of opportunities, plenty of great concession packages,” Hironori Imaizumi, field research manager at CBRE, told Commercial Observer. “But where we saw a lot of the tightening was in areas like SoHo or Flatiron, where during the pandemic some of the best spaces came onto the market and those were scooped up so quickly that the surrounding areas are starting to see a little bit of supply constraints and prices go up.”
Of those retailers leasing between 2020 and 2023, according to the report, 20 percent were conventional retail while another 20 percent were part of the food and beverage industry. About 23 percent was a mix of furniture and entertainment, which included Look Dine-In Cinemas’ 25,000-square-foot lease at 625 West 57th Street in May 2023 and Orior Furniture, which took 21,900 square feet at 32 Mercer Street which opened in mid-2022.
Luxury is also having a moment, especially on Fifth Avenue. Clothing brand Skims leased 25,020 square feet 647 Fifth Avenue in the Plaza District in July 2023, and many longtime tenants are becoming owners of the buildings they occupy.
Japanese caffeine monger Geshary Coffee, for example, bought 560 Fifth Avenue in December for $38 million from the Riese Organization, which had owned the building for about a half-century.
About the same time, within weeks of one another, Wharton Properties" class="company-link">Wharton Properties’ Jeff Sutton sold off properties on Fifth Avenue for a modest $1.8 billion. They included 724 Fifth Avenue for $425 million and 720 Fifth Avenue for $410 million, both sold to Prada, the anchor tenant. A few weeks later, 717 Fifth Avenue was sold for $963 million to Kering, the company that owns Gucci, Balenciaga and Alexander McQueen.
Mark Hallum can be reached at mhallum@commercialobserver.com.
