LAS VEGAS-In the first quarter, retail pricing in Manhattan jumped a whopping 25%. So says James Nelson, a partner with GlobeSt.com Thought Leader Massey Knakal and author of the column The Full Nelson, which also appears on this website. He believes 2014 can outpace the previous peak year, 2007, if all economic cylinders continue to fire. And, with an average of only five square feet of shopping space per person in the city, growth in this greatly under-retailed market is virtually assured.
Q: So, James, what are you seeing in terms of New York City sales and pricing?
A: We’re definitely in a historic time in 2014. If the first quarter was any indication, there will be more sales in 2014 than there were in 2007, which was the previous peak. Right now it looks like about $53 billion, just off a bit from 2007, but the first quarter is always the sleepiest. In terms of pricing, it skyrocketed by 25%, and the average building now sells for $13,000 per square foot.
Q: You’ve said that Manhattan is under-retailed. Explain.
A: The average New York consumer has five square feet in which to shop, as opposed to elsewhere in the country where the average is 30 square feet. Just the physical limitations of the city alone mean we’ll never have enough retail to satisfy the demand.
Q: So what’s the outlook?
A: Vacancies are very low and there’s not a lot of spec development. There are only 5,000 apartments on the market right now. That’s a drop in the bucket for a city with a population of eight million people. So the supply/demand metrics are very strong. Of course we’re watching interest rates and cap rates and locally what happens with property taxes. But for the next year or two, we’ll enjoy it while it lasts.