Manhattan retail market awaits recovery as vacancies rise in Q1

Leasing velocity down 59% YOY


Manhattan’s retail market started 2021 the same as it ended 2020 — with bad news in the form of rising vacancy rates and lower rents.

Retail leasing velocity in the first quarter of 2021 fell for the seventh consecutive quarter, according to CBRE’s latest report on the borough’s retail sector. Total leasing was down 26.3 percent from the previous quarter, and by nearly 59 percent from a year prior — notably, before Covid lockdowns took hold of the city.

Even the neighborhoods that did see leasing had much lower numbers than normal. Take the Plaza District, typically viewed as the most expensive and desirable area of the city. It had the highest leasing velocity in the first quarter, but that was thanks to just two leases totaling 47,000 square feet — and one of those was for a 46,000-square-foot space. Gucci signed a two-year renewal for that location in Trump Tower.

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Availability remains high across the 16 retail corridors CBRE tracks. An all-time high of 275 retail spaces were vacant in the first quarter, an increase of 4.2 percent from the 264 recorded at the end of 2020.

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Average asking rents also declined — although that trend predated the pandemic, as this is the 14th consecutive quarter to see rents slide. The average asking rent hit $618 per square foot, a 5.1 percent decline from the fourth quarter of 2020 and a 13.4 percent drop from the prior year.

Some corridors saw a greater decline than others. Asking rents along Prince Street in Soho dipped by 39.5 percent year-over-year, from $683 per square foot to $414. That was the largest percentage decrease of the quarter.

But while the news from last quarter was largely bleak, the report notes that there are reasons to be hopeful going into the rest of the year. Restaurants are reopening at greater capacities, more people are getting the Covid-19 vaccine and — spurred by cheap rents — new leases are being signed.

In Times Square, for example, average rents dropped 21.5 percent year-over-year, from $1,647 per square foot to $1,293. However, some retailers, including Jollibee and Taco Bell Cantina, have taken advantage of those discounts.

“Savvy retailers are now taking advantage of the tenant-favorable market conditions, successfully negotiating enhanced tenant improvement allowance, free rent, flexibility on term length and percentage-rent deal structures,” Nicole LaRusso, CBRE senior director of research and analysis, said in a statement.