Manhattan retail rents are down 30% from 2014 peak: CBRE

Concessions are on the rise as shops struggle to make money

May.May 30, 2017 08:50 AM
Doubletree Times Square

Times Square

Net effective retail rents in Manhattan have fallen 20 to 30 percent from their 2014 peak, according to a report from brokerage CBRE.

The estimate accounts for concessions, which have been on the rise across Manhattan as landlords try to keep face rents up. “Investors have expectations of returns, so they need to keep rents at a certain level so they match the pro-forma,” CBRE researcher Nicole LaRusso told the Commercial Observer. “And then they negotiate all these concessions on the side. So asking rent might not be down, but net effective rents are.”

The report is another sign that the retail market is in trouble, even in New York. Between 2010 and 2014, retail rents rose 90 percent while retail sales only grew 32 percent, according to CBRE. Since then, a dip in tourism, the struggles of major department stores and the continued rise of online retail only made matters worse. In many cases investors who spent a fortune on a property betting they could achieve high asking rents are now faced with vacancy.

“It’s one thing to Open Up A Store On Third Avenue [or] on Columbus Avenue, [but] it’s a very different thing to open up a store on Fifth Avenue or Prince Street that could be a $5 [million] or $8 [million] or $10 million rent for a year,” Cushman & Wakefield’s Alan Schmerzler told the Observer. “For that rent, I could open several stores in malls around the country. Until rents come down to the point where I can defend that decision.” [CO]Konrad Putzier

(To view a ranking of the most expensive retail leases in NYC, click here)

Related Articles

Bed Bath & Beyond CEO Mark Tritton (Credit: Getty Images, Mike Mozart via Flickr)

Bed Bath & Beyond to invest $1B in store upgrades and buybacks

Brookfield Asset Management CEO Bruce Flatt

“We underwrite every investment like we’re going to hit a recession”: Brookfield CEO

Kitopi CEO Mohamad Ballout (Credit: Kitopi and iStock)

“Smart” kitchen and delivery startup raises $60M for US expansion

Cadre founder Ryan Williams and Allen Smith

Cadre brings on former Four Seasons CEO as president

AKS Capital Partners Managing Partners Aaron Appel and Walker & Dunlop CEO Willy Walker

Walker & Dunlop acquires Aaron Appel’s AKS Capital Partners

From left: Publisher and founder Amir Korangy, Editor-in-chief Stuart Elliott and VP of Corporate Development Yoav Barilan

TRD’s founders share war stories from over the years

As the years go by_A look back at 17 years of real estate history

A look back at 17 years of real estate history

Vornado CEO Steve Roth and 595 Madison Avenue (Credit: Google Maps and Getty Images)

Fendi, Berluti take over old Coach flagship at 595 Madison