New York City’s retail market has started to pick up, but unfortunately asking rents are still lower than they were prior to the COVID-19 pandemic. Meanwhile, property vacancies in the Big Apple have hit an all-time high, according to CBRE’s second quarter retail report, Commercial Observer reports.
Available retail space increased from 275 spaces during the first quarter to 290 in the following one in the 16 prime retail corridors that CBRE tracks. Average retail asking rent for those corridors decreased less than one percent since the first quarter—$615 per square foot. That marks the 15th consecutive quarter that the average asking rent went down.
Decreased retail activity has not impacted all of Manhattan’s popular shopping spots in the same fashion, according to Commercial Observer. For example, SoHo saw the highest leasing velocity, but also experienced a 22.9% drop in average asking rents, year over year ($631 to $487 per square foot), which was the biggest decline in CBRE’s report. Prince Street in SoHo however saw its average asking rent from the first quarter and last year go up.
Meanwhile, Times Square’s annual decrease in asking rents during the second quarter, from $1,647 to $1,277 per square foot, was the second largest during that timeframe. The Plaza District and Flatiron/Union Square had the second and third-largest square footage leased during the second quarter, respectively. The difference between these areas could be the lack of international tourists, Hironori Imaizumi, CBRE’s senior analyst for the firm’s retail team said.
“The areas that we are seeing in trouble, most are places where tourism is a huge factor,” Imaizumi said. “An example is Times Square, (which) at the moment, is still facing a huge amount of pressure to decrease rent, because of the fact that there’s been such a lack of activity, and we don’t even know once the restrictions are lifted if the activity is going to return to the neighborhood.”
The real estate community has had its mind on tourism too, Commercial Observer reports. New York’s $80 billion tourism industry has slowed during COVID-19. The combination of the pandemic and recent concerns over gun violence have made industry leaders wondering when tourists might will come back.
Imaizumi had a more positive outlook on New York City’s recovery, however. That’s because of an uptick in leases from businesses that want to open a New York flagship location. Recent examples include Popeyes, which signed a 6,100 square foot Times Square flagship lease at 1530 Broadway, according to the New York Post.
“The one thing that I’m very happy to see is we saw a lot of external demand come back,” said Imaizumi. “These are companies that you know want to establish their flagship store.”
The analyst was also optimistic that low rents could help usher in small- and medium-sized businesses and increase retail activity.
Space availability has increased as well, Commercial Observer reports. Both retailers and consumers have put additional focus on more affordable markets in Midtown South and Downtown. Meanwhile, Upper Madison Avenue has increased the amount of ground floor spaces by 25%. Availability at Fifth Avenue in Flatiron has doubled. Those figures have Imaizumi cautiously optimistic as he warned that some new vacant spaces could be the result of leases’ natural life cycle.
“A lot of these tenants are currently also facing their natural lease expirations,” he said. “And the market is just not attractive enough to stay in those spaces, but what we don’t capture is that sometimes they relocate to better markets within the city.”
While leasing velocity has continued to slow, Imaizumi noted that the data tends to also slow down lag as CBRE gets information on more second-quarter deals after the quarter ends, though he was still surprised by the slowdown.
Joe Dyton can be reached at email@example.com.