What did the REBNY Fall 2016 Retail Report reveal about Manhattan retail market conditions?
REBNY's Fall 2016 retail data showed meaningful divergence across Manhattan corridors, with transit-anchored and tourist-heavy locations maintaining rents while secondary corridors softened under e-commerce pressure and tenant category shifts toward food and service uses with lower rent tolerance.
1. Manhattan retail rents showed divergence in Fall 2016, with prime locations maintaining levels while secondary corridors faced meaningful softening. 2. Foot traffic patterns anchored by transit hubs and tourism reliably outperformed corridors dependent on residential retail spending. 3. E-commerce displacement was visible in tenant category shifts, with food and service uses replacing discretionary retail in affected corridors. 4. The REBNY data indicated investor sentiment was adjusting capitalization rate expectations ahead of formal rent corrections.
Increasing retail inventory and a slower retail sales environment in New York City began to affect ground floor asking rents in Manhattan's most prominent retail corridors. REBNY's Fall 2016 Manhattan Retail Report showed 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 still subdued.
While the range of ground floor asking rents started to decrease on both the high and low ends in Fall 2016, advisory group members identified that these asking rent adjustments were indicative of a natural correction in a market that had been soaring for a brief period following the 2008 financial crisis.
Key Corridor Movements
Madison Avenue between 57th and 72nd Streets saw the average asking rent decrease 11% to $1,433 per square foot from $1,613 in Fall 2015, as inventory levels rose. The median asking rent dropped 22% 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, where the average asking rent fell 9% to $755 from $831. Herald Square on West 34th Street fell 11% year-over-year from $836 to $745 per square foot.
The notable exception was the Financial District on Broadway between Battery Park and Chambers Street, where the average asking rent experienced a 20% jump year-over-year from $308 to $369 per square foot. This corridor benefitted from recent transportation improvements and increased foot traffic from the World Trade Center complex and the Fulton Center transit hub.
Market Context
In an environment of high asking rents, retailers were willing to wait longer for the ideal space to become available. Advisory group members noted that retailers were finely combing options that accommodate their needs and are situated in locations that best suit their brands, while becoming more cost-conscious to increase profitability. Some retailers, now looking to relocate, would sacrifice larger store size and wider frontage for ideal placement in a corridor that most effectively reflects their brand.
The REBNY Fall 2016 Retail Report showed continued rent pressure across Manhattan corridors, with specific submarkets diverging significantly based on foot traffic patterns, tenant category mix, and the relative strength of tourist versus commuter retail demand.
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