REBNY Retail Report Fall 2016: Manhattan Rents Decline in 11 of 17 Corridors

Increasing retail inventory and a slower retail sales environment in New York City have started to affect ground floor asking rents in Manhattan's most prominent retail corridors. The Real Estate Board of New York's Fall 2016 Manhattan Retail Report shows that average asking rents declined in 11 of the 17 retail corridors surveyed, a shift from Spring 2016 when availability was accumulating in some corridors but the effect on asking rents was subdued.

Key Corridor Movements

Madison Avenue, between 57th and 72nd Streets, suffered from increased availability of ground floor retail spaces. As the corridor's inventory level rose, the average asking rent decreased 11% to $1,433 per square foot from $1,613 in Fall 2015. An increase in the availability of less expensive ground floor spaces caused a 22% drop in the median asking rent to $1,350 from $1,728 per square foot.

Increased retail inventory also hurt asking rents in SoHo, on Broadway between Houston and Broome Streets. The average asking rent fell 9% to $755 per square foot from $831 last fall. Midtown South asking rents in Herald Square on West 34th Street fell 11% year-over-year from $836 to $745 per square foot.

Despite the average asking rent drops seen in other corridors, robust price growth occurred Downtown in the Financial District on Broadway between Battery Park and Chambers Street. The average asking rent for ground floor retail space experienced a 20% jump year-over-year, rising from $308 to $369 per square foot. Retail spaces near Fulton Street have been the largest beneficiary of increased foot traffic from the World Trade Center complex and the openings of the Oculus and Fulton Center transit hub.

Market Context

Members of the advisory group identified that these asking rent adjustments are indicative of a natural correction in a market that had been soaring for a brief period following the 2008 financial crisis. The lower asking rents recorded in Fall 2016 brought disinterested retailers back into the market as they anticipated higher carrying costs for property owners. In an environment of high asking rents, retailers are willing to wait longer for the ideal space to become available, finely combing for options that accommodate their needs and are situated in locations that best suit their brands.