Retail Market Softening Sparks Activity

NEW YORK CITY—A softening in New York City's retail market has turned out to be welcome news for some landlords who say that the fall in rents has prompted some retailers to get off the sidelines and finalize lease deals.

The Real Estate Board of New York in its fall retail report notes that seven of the 17 retail corridors it tracks in Manhattan saw ground floor asking rents fall of late.

"Manhattan is continuing to achieve robust asking rents and experience strong leasing activity, particularly in retail corridors experiencing significant residential development and a resurgence of neighborhood vitality," says REBNY president John Banks III. "New York City is one of the world's greatest shopping destinations and the softening of retail rents over the last several months has provided an opportunity for retailers to make moves."

REBNY in its retail report released in May of this year reported that ground-floor retail space in all but one of 17 Manhattan corridors experienced year-over-year growth in asking rents.

Although average asking rent in most corridors increased compared to last year in its latest report, the increases were not as extreme as in previous reports, REBNY states. In addition, while the number of asking rent decreases was greater than those in past reports, none were more than 6%. REBNY reports the most notable decrease in asking rent was in the Madison Avenue corridor between 57th and 72nd streets, in which the average asking rent fell from $1,709 per square foot to $1,613 year-over-year. Broadway on the Upper West Side also experienced a softening in asking rents. Ground floor space between 72nd and 86th streets fell 4% year-over-year to $361-a-square-foot. The Herald Square district saw a 6% decline over that same period to $836-a-square-foot.

The softening in asking rents in some markets, particularly along the Madison Avenue corridor is not indicative of a lack of demand but "is instead owed to the increased amount of supply available in the corridor and landlords becoming eager to keep their spaces occupied," says Michael Slattery, SVP of research at REBNY.

On the flip side, Midtown South, particularly in the Broadway Flatiron District between 14th and 23rd streets, enjoyed a 42% increase in average asking rent to $510 per-square-foot year-over-year. The East 57th Street corridor between Fifth and Park Avenue sported a 28% average asking rent jump year-over-year to $1,600-per-square-foot, while Third Avenue, between 60th and 72nd streets posted a 26% rise in average asking rent to $335-per-square-foot. REBNY adds that the Financial District has seen measurable improvement thanks to building revitalization and other tenancy-related initiatives.