NEW YORK CITY—The strong economy and healthy hiring environment continue to pay dividends for the New York City retail market.
Accelerated hiring in the education, health services, technology, professional and business services sectors are positive signs for the retail sector in the greater New York City area, according to a report released by Marcus & Millichap. Very low interest rates and New York City's status as one of the strongest retail markets in the world are prompting investors—both big and small—to bid aggressively in order to land retail product in the Big Apple.
“While trophy assets along Fifth Avenue and Madison Avenue in Manhattan will draw large institutional buyers, most market participants have switched to a value-add strategy in the face of plummeting interest rates,” the report states. Some investors have been targeting quality assets in Brooklyn and Queens of late.
Another major player in the retail investment market are foreign buyers who are seeking a haven for their capital in response to the volatile equity and currency markets. Marcus & Millichap pegs cap rates at below 4% for properties in the best locations, while first-year yields for suburban retail properties are now reaching the mid 7% range.
Property sales in the retail sector surged 27%, according to the third quarter report. Retail sales growth thus far in 2015 slowed to 1.9% at the end of the third quarter as compared to 4.6% in the previous four-quarter period.
The report also states that construction activity will ease somewhat this year. Marcus & Millichap estimates that 2 million square feet of retail space will come on line this year, expanding total inventory by 0.9% with the bulk of completions in Manhattan and Brooklyn. Last year, 2.2 million square feet came to market in the five boroughs of New York City. The largest delivery in 2015 will be Westfield Corp.'s 350,000-square-foot World Trade Center project in Downtown Manhattan. Michael Kors, Hugo Boss, John Varvatos and Turnbull & Asser have signed leases at the property. The 1.8-million-square-foot City Point retail development in Downtown Brooklyn will be the largest retail venture to open its doors in 2016.
The continued strength in the retail market has prompted developers to add 4.3 million square feet of projects to the New York City pipeline that have completion dates scheduled through 2018.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to asset-and-logo-licensing@alm.com. For more inforrmation visit Asset & Logo Licensing.