The Revitalization of Urban Retail

The economy having fully re-opened has led to increased retail presence in urban settings, including in some areas near the historically strong streets such as Madison Ave. and Michigan Ave, according to a new report from JLL about urban retail.

Nearly half of retail leases in prime corridor spaces sell apparel. Its 48% share there is up from the 35% mark in 2022. Athleisure retailers comprised 21% of new apparel leases, given its trendy look and the continued popularity of working from home.

Prime corridors are also home to many luxury brands. Fifth Avenue in New York, Newbury Street in Boston, Bloor Street in Toronto, and Chicago’s Gold Coast are home to many luxury brands’ new stores.

“In the wake of bankruptcies and store closures from retailers like Barney’s and Neiman Marcus, luxury consumers have demonstrated a persistent appetite for a thoughtful curation of products from their favorite high fashion brands,” JLL writes. “As a result, luxury boutiques have emerged as a growing category within the luxury space, composing 12% of new luxury leases in the last year.”

JLL said that many luxury retailers looking to open in New York City after the pandemic opted for SoHo. Its steady foot traffic provided by nearby residential populations has made it attractive. US consumer spending in September was 4.1% higher year-over-year.

“The resurgence of the affluent Upper East Side shopper has reignited interest in Madison Avenue,” JLL added.

On the Gold Coast, the neighborhood’s affluent residential population has lured retailers looking to expand to gravitate away from Michigan Avenue.

The improved economy has also resulted in sustained rent growth and historically low vacancy rates across the country while e-commerce penetration has normalized at around 15%.

Landlords in prime retail corridors saw 3.3% growth in asking rents over the previous year.

Also fully recovered is the hotel sector, especially in urban markets, JLL said. “This rebound has been driven by the resurgence of international arrivals to the US, with significant numbers of travelers arriving from the Middle East, Africa, and Europe. Average daily rate (ADR) and revenue per available room (RevPAR) in the U.S. surpassed 2019 levels by 13% in Q3 of this year,” according to the report.

Urban areas are benefiting from a surge in apartment living as a lifestyle choice, as many are staying in town, given that owning a single-family home is currently 62% more expensive than renting a unit in a multifamily property.

“This encourages demand for the multifamily housing that dominates urban centers, contributing to a broad consumer base in need of proximal retail,” JLL said.