The Manhattan retail market in the fourth quarter was characterized by a notable uptick in demand and asking rents in the Downtown Broadway corridor, according to CBRE – with asking rents along the Broadway corridor jumping 55 percent from the previous quarter.
The Downtown Broadway corridor saw asking rents jump to $449 per square foot at the end of last year, from $290 per square foot in the third quarter, the commercial brokerage said in its Manhattan retail market report Friday.
CBRE noted that while Downtown neighborhoods were once mostly known for housing many of the the city’s financial services office tenants, the emergence of TAMI-sector tenants has helped drive demand for increased retail options “as a rising number of retailers seek a presence in the area.”
The 55 percent jump in Downtown Broadway retail asking rents was the greatest quarter-on-quarter increase of any of the 16 corridors tracked by the brokerage, CBRE said, with the priciest availabilities there asking up to $600 per square foot. Asking rents also jumped on nearly 51 percent on a year-over-year basis in the fourth quarter.
Soho’s Broadway corridor, on the other hand, experienced softening — a trend noted by market observers in recent months as demand has shifted to the neighborhood’s side streets. Asking retail rents there dropped 5.4 percent in the fourth quarter, to $796 per square foot from $840 per square foot, in “the largest quarter-over-quarter decrease” of the corridors tracked.
“As a result, landlords in the [Soho Broadway] area are negotiating leases below asking prices to renew activity in this sought-after corridor,” CBRE noted, citing how a drop in tourist spending due to the strong dollar has meant retailers’ sales volumes have fallen behind landlords’ “high-rent expectations.”
Across Manhattan at large, average asking rents within seven of the 11 corridors “long tracked” by CBRE hit all-time highs last year, “surpassing even their pre-recession peak in 2007,” according to the report. Those corridors included two areas of the Meatpacking District, which saw rent growth ranging from 11 percent to nearly 13 percent, as well as Fifth Avenue between 49th and 59th streets.
Asking rents within that Upper Fifth Avenue corridor jumped 5.6 percent from the third quarter, to $3,826 per square foot from $3,623 per square foot previously. CBRE noted “increasing confidence” among landlords, driven in part by Bulgari’s new lease at the Crown Building at 730 Fifth Avenue – which broke the city record with rents in excess of $5,000 per square foot, as The Real Deal first reported.
The brokerage also found that at the end of the year, there was an “unprecedented” 2.4 million square feet of retail construction in the pipeline for Manhattan, largely due to mixed-use developments like Hudson Yards and Essex Crossing.