Manhattan asking retail rents have fallen to record lows, according to new research from REBNY. The fall 2020 Manhattan Retail Report shows that retail rents have declines in all 17 of the retail corridors in Manhattan since last year. The decrease in rents in each submarket ranges from 1% to 25% with eight retail corridors reporting the lowest asking rents in a decade.
The Broadway Houston St. through Broome St. submarket had the most significant decline in asking retail rents. The average asking rent is down to $367 per square foot, a 25% decline year-over-year. Since 2015, rents in the submarket have fallen 62%. Fifth Avenue 14th Street through 23rd Street were also down a significant 22%, and West 34th Street 5th Avenue through 7th Avenue asking rents fell 17% to $441 per square foot.
Other markets managed to survive the pandemic with little impact. Rents in the Broadway Battery Park through Chambers Street corridor declined only 1%. Columbus Circle 66th through 79th Street asking rents declined 3%.
As expected, most retail corridors are also seeing an increase in availability. Of the 17 total retail submarkets, 11 have seen a rise in the availability rate from 6% to 67% year-over-year. In addition to lower rental rates, many landlords are also offering concessions and tenant improvement packages in an attempt to drive leasing. Some landlords are also offering shorter lease agreements and percent-of-sales rent offerings in the near-term. Property owners are getting creative and remaining flexible to find ways to create cash flow and stability during the pandemic.
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REBNY also notes a widening spread between asking rents and taking rents. While asking rents have declined, taking rents are even lower, according to the report. Brokers have reported a difference of 20% between asking rents and taking rents.
The pandemic has certainly accelerated online shopping trends, once again disrupting the market. However, this year, brick-and-mortar retail is likely to see and increase in sales, which could in-turn help to drive retail leasing. A recent report from Colliers International predicts that online retail sales will decrease 8.5% in 2021, while in-store retail sales will increase 5.9%. This is due to pent-up demand to return to “normal” pre-pandemic life and the assumption that retailers will reopen for in-store shopping n 2021, once coronavirus cases decline. This year, in-store retail sales actually held up better than expected, growing 2.2% overall.