Retail Rents Rise Again in Manhattan

A rising tide of tourism, steady demand from entertainment and luxury sectors and a return to normal for holiday shopping ended 2022 on a high note for Manhattan’s retail sector, with asking rents rising for the second consecutive quarter in Q4.

Asking rents for retail space in Manhattan ticked up 1.2% in Q4 to $615 per SF, a 2.9% YOY increase over Q4 2021, according to a new retail market report from CBRE. The taking rent index for the prime 16 retail corridors in Manhattan posted a 530 bps YOY increase in 2022 and the highest quarter-end finish since Q3 2019.

The Big Apple climbed back on its pedestal as one of the world’s most-popular tourism destinations in 2022, drawing an estimated 56M visitors, according to the city’s tourism board, NYC & Co.

In an even brighter sign of the travel resurgence, the total number of tourists flocking to NYC included nearly 9M international travelers—more than triple the number of foreign visitors in 2021.

The number of direct ground-floor availabilities across Manhattan’s 16 premier shopping corridors decreased from 229 to 222 in Q4, a decline of 3.1% quarter-over-quarter and 16.5% YOY, the sixth consecutive quarterly improvement in the availability tally, CBRE said.

In the lone sign that Manhattan retailers are not likely to be immune to stiffening headwinds in coming weeks, the rolling four-quarter aggregate leasing volume, which measures total leasing (renewals and new leases) for the four prior quarters, was 2.5M SF, a decline of nearly 10% from Q3, but still up nearly 12% on a YOY basis. The slip in the aggregate velocity ended five consecutive quarters of improvement in this metric. The 2.5M SF total remains nearly 40% lower than the pre-pandemic peak of 4.1M SF, recorded in Q2 2019.

According to CBRE, US retail sales during the holiday season increased 7.6% YOY, while online sales grew 10.6% during the same period. Black Friday spending was up 12%.

“On a national level, inflation remains the primary economic focus which should push the economy into a moderate recession in 2023,” CBRE’s report said. “Sharply reduced expectations of earning growth in 2023 means that firms are looking to cut costs and reduce headcount.”

Quarterly retail sales in NYC ticked up 1% in Q4 to $43.2B; for the year, retail sales topped $170B—a $35B increase since 2020.