Headwinds Blow But Demand Remains for Manhattan Retail Space

Get in, loser, we’re going shopping. 

Economic and political uncertainty might be weighing heavily on today’s retailers, but Manhattan’s retail real estate market seems to be doing just fine, at least for now.

The Real Estate Board of New York (REBNY)’s Manhattan retail report for the first half of 2025 shows steady leasing and demand for retail space, a dip in availability, and a rise in asking rents in some popular neighborhoods — led mostly by apparel, food and beverage, and beauty and wellness tenants.

“Headed into 2025, it was already taking on average a year or longer to complete significant retail lease commitments,” Keith DeCoster, vice president of research at REBNY, said in a statement to Commercial Observer. “Tariffs and economic uncertainty have lengthened that process a bit.

“By and large, despite the extensive investment and long-term planning associated with operating in New York City, retailers understand the unique value of having a presence here,” DeCoster added.

The report, released Thursday, found retail leasing activity in Manhattan was steady from January through June of this year, with many retailers having to expand their search for space across the borough as availability dropped and asking rents surged in prime corridors like SoHo and the Upper East Side.

In SoHo, average asking rents along Broadway increased 24.1 percent compared to the second half of 2024, while rents on the Upper East Side from East 49th to East 59th streets rose 17 percent, according to the report.

Luxury apparel and accessories retailers absorbed most of the quality storefronts in SoHo and along Madison Avenue, but other retailers widened their search to areas like the Flatiron District, Union Square, NoHo and NoLita, the report found. For example, The North Face recently leased space at 95 Fifth Avenue in the Flatiron District.

“With limited options right now in SoHo and on Madison, we’re seeing retail demand spill into NoHo, NoLita and Bleecker Street in the West Village,” DeCoster said. “These are good choices for smaller boutique brands.”

In addition, many tenants requiring larger spaces — such as fitness and arts and entertainment companies — were active in Chelsea and Tribeca during the first half of the year. This included Powerhouse Gym’s lease for 18,887 square feet at Chelsea’s 158 West 27th Street in March, and gymnastics studio NYC Elite’s 20,908-square-foot renewal at Tribeca’s 40 Worth Street in June. Meanwhile, in the Seaport District, immersive arts and entertainment company Meow Wolf took nearly 75,000 square feet at Pier 17.

There’s also a lot of retail availability in areas such as Herald Square and the Financial District, the report said, as both neighborhoods each have more than 15 available storefronts. One tenant that recently fled to Herald Square was apparel brand and retailer Old Navy, which signed a 55,000-square-foot deal at 50 West 34th Street in May.

But one of the most noticeable retail trends so far in 2025 is “how important hospitality has become to retail,” especially luxury tenants, according to Joanne Podell, executive vice chair at Cushman & Wakefield and one of the report’s authors.

That includes Armani’s restaurant at 760 Madison Avenue, LVMH’s Le Cafe Louis Vuitton at 6 East 57th Street, Tiffany’s Blue Box Cafe at 727 Fifth Avenue and Prada’s new cafe at 142 Mercer Street, among others.

“From a retailer’s perspective, it’s brilliant, because you keep them in the store,” Podell said. “The longer you keep someone in the store, the better chance you have. So it’s certainly self-serving, and it’s nice for the consumer.”

Meanwhile, many retailers have benefited from return-to-office mandates, which often result in more foot traffic in and around stores.

Midtown was one of the first areas to benefit from commuters returning to work this year, as luxury retail deals there piled up, including British men’s clothing retailer Charles Tyrwhitt’s lease in June for 3,800 square feet at 477 Madison Avenue and luxury car company Ferrari’s deal for 7,629 square feet at 425 Park Avenue in April.

Also returning to Midtown were restaurants looking for space at the base of large office buildings. That included deals for hospitality brand MM by Morimoto at 1255 Broadway, steakhouse Maple & Ash at Rockefeller Center and steakhouse STK at 200 Park Avenue South.

All of 2025’s leasing activity so far happened in spite of declining tourism numbers in New York City, as air travel from Canada was down 30 percent at John F. Kennedy International Airport as of April, according to the report. And, while some smaller retailers have certainly been affected by the drop in tourism, most of the city’s retail is pushing through.

“[Declining tourism is] noticeable and concerning, but compared to some parts of the country, not nearly as impactful,” DeCoster said. “New York City is fortunate that other core drivers of retail demand remain vibrant.”

— With additional reporting by Amanda Schiavo.

Isabelle Durso can be reached at idurso@commercialobserver.com.