How did Manhattan's retail market perform in 2016 and what were the key drivers?
Manhattan's retail market in 2016 showed strong rent growth and sustained institutional demand across prime corridors, with SoHo and Meatpacking District leading performance. E-commerce pressure was visible in tenant mix shifts but had not yet translated into meaningful rental rate declines in prime locations.
1. Manhattan retail rents continued rising in 2016 across major corridors, reflecting sustained consumer spending and limited new supply. 2. SoHo and the Meatpacking District showed the strongest rent growth while Midtown stabilized after prior softness. 3. Institutional investor demand for ground-floor retail in prime locations remained competitive throughout the year. 4. E-commerce pressure was beginning to appear in tenant mix changes but had not yet materially affected rental rates.
- Manhattan is developing around 2.4 million square feet in new retail space, which represents $374,400,000 in potential new rent cash flow from the retail market alone
- Swatch and Victoria's Secret took the biggest rents reaching up to $35 million in annual rent; Bulgari spends over $5,300 per square foot
- Retail prices as of Fall 2015 grew at a CAGR of 12.35% since Fall 2012 but only grew 4.84% in the past 10 years annually
Retail leases are breaking records as average prices across Manhattan see double-digit price movement from 2014 to 2015. Bob Knakal, Chairman of Investment Sales at Cushman Wakefield, saw more blockbuster deals in 2014 than in 2015; however, the market was not shy about its price inflation.
The current price trend has been happening since 2012. Compound annual growth rates have been a whopping 12.35% since the Fall of 2012. If we look at this trend for the past 10 years, growth falls to 4.84%.
2015 saw the most notable deals in midtown Fifth Avenue. Bulgari accepted rents at over $5,000 per square foot at the corner of 57th and 5th, which overshadows most of the market. Swatch competed for the greatest annual estimated rental price at $35 million USD, a lease that will cost them almost $3 million per month with the building owner Vornado. Vornado also had the second largest deal with Victoria's Secret's estimated $34 million USD lease covering more than four times the space, showing how location can affect price.
With 2.4 million square feet in new retail space coming to market, Manhattan will see $374,400,000 in annual rental revenue, or $31,200,000 per month, as the average square foot in Manhattan reached $156. One has only to speculate how much more investors will make when office space, rentals, and condominium sales are added.
Manhattan's retail market demonstrated strong growth in 2016 with rising rents and declining vacancy across key corridors, driven by sustained consumer spending, limited new supply, and continued institutional investor demand for ground-floor retail assets in the borough's most productive commercial districts.
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