As rents drop, Manhattan retail spaces are filling up
Leasing activity increased as asking rents fell for 18th consecutive quarter
Following years of challenges, Manhattan’s retail corridors are enjoying a resurgence.
The market had a 23 percent year-over-year increase in leasing in the first quarter of 2022, according to a report by CBRE. Direct ground floor availability across Manhattan’s 16 premier shopping corridors decreased for the third consecutive quarter, with availability dropping from 266 storefronts to 247, a 7 percent quarter-over-quarter decline.
“Despite feeling some of the impact from the Covid omicron variant and other stressors, New York City saw many bright spots in Q1 2022, including declining availabilities and strong leasing velocity, which totaled 2.1 million square feet in Q1,” CBRE analyst Nicole LaRusso said in a statement.
The rise in leasing came in part as landlords reduced their pricing to levels that retailers are willing to pay. Asking rents have fallen by 5 percent in the past year.
The Plaza District led the surge, recording the highest leasing velocity among the 16 corridors with over 83,000 square feet leased across nine transactions. The largest deal in the neighborhood was a 15-year, 26,000-square-foot lease signed by the California-based, Michelin-starred Taiwanese eatery Din Tai Fung, which committed to its first New York City location at Paramount Group’s 1633 Broadway.
Also in the district, a new high-end Italian chophouse, Maribella, announced plans to take over the 17,000-square-foot former New York Yankees Steakhouse space at 7 West 51st Street.
Flatiron/Union Square also recorded significant activity in the first quarter with over 74,000 square feet leased across six transactions. The biggest deal was signed by Petco Animal Supplies, which took nearly 30,000 square feet at 44 Union Square East — the historic Tammany Hall building. Food52, a new kitchen and home improvement brand, also committed to more than 26,000 square feet of retail space at 902 Broadway.
Upper Madison Avenue had the largest drop in availability among the 16 corridors. Availability declined nearly 9 percent quarter-over-quarter and 21 percent year-over-year to 42 spaces in the first three months of 2022.
The Downtown Broadway corridor also improved. Availability dropped 23 percent from the previous quarter and 26 percent from the previous year to 20 spaces in the first quarter.
But filling more spaces required some sacrifice by landlords, the CBRE report showed. Average asking rent across Manhattan’s retail corridors declined for the 18th consecutive quarter, falling to $591 per square foot, down 1 percent from the fourth quarter and 5 percent year-over-year.
Rent declines were pronounced in some shopping corridors. Average asking rent in Downtown Broadway fell to $316 per square foot, down 14 percent from the previous quarter and 22 percent from last year — the largest year-over-year decline among the 16 corridors.
Similarly, average asking rents along Fifth Avenue in the Plaza District fell to $2,524 per square foot, a 5 percent quarterly drop and 16 percent year-over-year decline. It was the first time since 2012 that average pricing on the posh corridor fell below $2,600.