Latest REBNY Manhattan Retail Report Shows Strong Demand, But Some Segments Still Lag

Rents remain below pre-pandemic levels but up year-over-year along most corridors

NEW YORK, NY -The Real Estate Board of New York (REBNY) today released its H1 2024 Manhattan Retail Report, which examines activity along major retail corridors in the borough from January to June 2024. Brokers noted sustained demand in many corridors in the first six months of 2024 - particularly from food and beverage as well as apparel. Increasing office visitation rates and growing tourist activity has supported strong demand. With limited availability in the most sought-after corridors, retailers have expanded their activity to areas like the Upper West Side and Grand Central.

No corridor has returned to its pre-pandemic rent peak. Professionals surveyed for the report noted some ongoing challenges. While, many potential businesses are seeking smaller and mid-sized storefronts, the pool of retailers seeking larger spaces is more limited. In addition, delays in permitting and licensing, elevated buildout costs, and restrictive lending also inhibit lease completion and store openings. Nevertheless, anticipated record tourism in the next several quarters, sustained return to office and recent City of Yes Economic Opportunity reforms all provide cause for a positive outlook for Manhattan retail.

The average asking rent in 10 of the 16 corridors examined in this report rose from a year ago, with notable jumps in the Madison Avenue (up from $834 to $945) and SoHo (up from $376 to $481) corridors. Compared to the second half of 2023, asking rent posted slight declines in several corridors. In some neighborhoods, such as Columbus Avenue, more expensive storefronts have long been leased - the remaining, lower-priced options are dragging down the average asking rent. In other cases, such as Lower Manhattan, rent has dipped due to slower leasing activity. There have been some notable leases in these areas, but longer-term commitments, particularly for larger blocks of space, have been more sporadic.

Shrinking availability has resulted in bidding wars for space within multiple corridors, allowing owners to be more selective on tenants, hold firmer on rents and pull back on concessions. Corridors with the most significant increases in average rents since REBNY's last report were Broadway and Seventh Avenue (42nd Street-47th Street), Bleecker Street (Seventh Avenue South-Hudson Street) and Fifth Avenue (49th Street-59th Street). Notable deals and openings in these submarkets during the first half of the year include the new store by high-end outdoor apparel brand Arc'teryx within Rockefeller Center and the arrival of the Continuum Club members-only wellness experience at 676 Greenwich Street.

The rapid recovery of SoHo and Madison Avenue retail market demand over the last 18 months underscores Manhattan's continued appeal as a must-have location for luxury retail. Deals that exemplify this include Ferrari's expansion to 92 Prince Street and the move by French luxury leather goods brand Maison Goyard to 699 Madison Avenue. As detailed in the report, luxury retail's confidence in Manhattan's value has been amplified in recent months by several prominent $100-million-plus property sales - headlined by Kering's $936 million purchase of 717 Fifth Avenue and Prada's $835-million (720 and 724 Fifth in late 2023).

Leasing activity has also gained momentum in other areas like Grand Central and Midtown East, largely due to improved return to office trends. Recent deals in these submarkets by retailers traditionally targeting office workers include the WatchHouse coffee chain announcing plans to open its second U.S. location within the Chrysler building and HF Food Halls agreeing to revamp the 11,000 square foot food hall on the ground floor of 570 Lexington Avenue.

While staff shortages and quality of life issues continue to challenge retail businesses, tourism is gaining positive momentum and creating optimism among retail market professionals. Visa reports spending on retail in Times Square alone totaled $191 million for the first quarter of 2024, up 32% from last year, and was driven primarily by domestic visitors. In its most recent Global Travel Trends Report, American Express found that New York City ranked as the top city for sports travel, with 30% of respondents saying they are planning a trip due to a sporting event.

The recently adopted City of Yes for Economic Opportunity plan is also expected to strengthen New York City's retail market and spur activity. The plan includes efforts to update zoning and City ordinances that often get in the way of filling vacant storefronts and building vibrant, activated streetscapes.

"Surging tourism invigorated Manhattan retail in 2022 and 2023. During the last several quarters sustained office building visitation has provided an added boost to select sectors and corridors," said Keith DeCoster, Vice President of Research at REBNY. "Nevertheless, tourism and return to office remain below their pre-Covid peaks and lagging neighborhoods and pockets of vacancy underscore the reality that retail businesses still face significant obstacles. Hopefully, the implementation of the City of Yes for Economic Opportunity and tools in the State budget to help create more housing across the city, will eventually help the retail sector in areas that remain challenged."

The full report and analysis, along with other studies on the New York City real estate market and industry by REBNY, can be found here.

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