Manhattan retail rents stagnant even as foot traffic returns

Manhattan’s retail market is stabilizing as shoppers return to the city and generous pandemic-era concessions fade, but asking rents in most key corridors have stalled far below their pre-Covid peaks.

Just five of 16 Manhattan retail corridors tracked by the Real Estate Board of New York saw average asking rents increase from the spring to the fall, according to a report released this week. Two corridors saw asking rents flatline, while nine experienced declines.

The largest increase came along West 125th Street in Harlem, where the average asking rent jumped 15.1 percent from the spring and 24.1 percent year over year to $165 per square foot. Asking rent along the stretch, which was recently awarded the state’s first licensed cannabis dispensary, is now higher than it was in fall 2019, before Covid locked down the city.

The Central Harlem corridor was closely followed by Broadway between 14th and 23rd streets in Union Square and the Flatiron District, where the average asking rent rose 14.7 percent from the spring and has similarly surpassed 2019 levels.

Things were not nearly encouraging further up Broadway. The Times Square corridor, including Broadway and Seventh Avenue between West 42nd and 47th streets was home to the largest decrease from the spring. The average asking rent dropped 11 percent in Times Square, a submarket that still has large vacancies and has seen its average asking rent plummet 59 percent from its pre-pandemic peak of more than $2,400 per square foot.

Seven corridors saw their average asking rents increase from last fall, while nine experienced year-over-year declines. The steepest annual drop came Downtown along Broadway between Battery Park and Chambers Street, where average asking rent fell by more than 28 percent.

Like Times Square, many of Manhattan’s premier retail corridors have average asking rents well below their pre-Covid highs, the report shows. Average asking rent on Fifth Avenue between East 49th and 59th streets is down 33 percent from its peak of $3,900 per square foot. While it remains by far the borough’s priciest retail real estate, with average asking rent of nearly $2,600 per square foot, many flagship spaces remain empty as tenants tussle with leasing costs and buildout prices.

Madison Avenue’s “Gold Coast” between East 57th and 72nd streets saw its average asking rent drop by 9.6 percent from the spring and 7.3 percent from last fall to $695 per square foot.

Downtown, Soho’s asking rent is down almost 65 percent from its peak of $977 per square foot in 2015 to $343 this fall. The average asking rent in the West Village between Seventh Avenue South and Hudson Street stayed the same from the spring, but declined year-over-year by 9.6 percent.

There have been some encouraging signs. Fewer available storefronts in areas such as Prince and Greene streets in Soho or Bleecker Street in the West Village has pushed some retailers to pick up spaces in nearby corridors, like along Broadway in Soho. Keith DeCoster, REBNY’s Director of Market Data and Policy, said this “underscores (retailers) confidence in retail demand.”

The report also cited an uptick in retail foot traffic, both from residents and tourists, that benefited retailers over the last six months.

However, many obstacles still remain. Retailers are grappling with widespread staffing shortages, supply-chain issues and delayed build-outs that have plagued the industry’s recovery from the pandemic. And rising borrowing costs spurred by higher interest rates will continue to curtail shoppers’ spending next year, according to REBNY.

The borough’s largest leases signed in the last six months both occurred in Lower Manhattan. French department store Printemps will open a 54,400-square-foot store at Harry Macklowe’s 1 Wall Street, and the luxury fashion brand Alexander Wang inked a 46,000-square-foot lease for the top floor at the Howard Hughes Corporation’s 11 Fulton Street in July.

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