The national average forecast for 2008 was for asking rents to rise to approximately $20 per sf, an increase of 2.6%. Higher vacancies make owners increase strategies to bring in tenants, which affected growing rates.
"Retail properties in areas with significant pedestrian traffic will continue to be in high demand, as rents are projected to continue rising during the near term in the five boroughs," says Edward Jordan, regional manager of Marcus & Millichap's Manhattan office.
Over the past few years, retails rents have nearly doubled in Lower Manhattan, an area with high pedestrian activity and wide varieties of shops. Rents are sitting at about $100 per sf, a distinct improvement for the slice of town. The experts attribute the gain to a 30% population growth since 2001, an improving selection of stores and the residents' median income that is three times higher than average.
Retail space has also improved in the city's largest borough, Brooklyn. Areas such as Downtown, Williamsburg and Park Slope continue to see rises in rent prices as retail and residential development continues. This is due in part to redevelopment of both areas. Older tenants are leaving these areas while newer and more national tenants able to pay higher rents are coming into Brooklyn. The report did not verify how much average rents were or how much the average improvement was.
The report mentioned that Atlantic Yards will bring nearly 250,000 sf of retail space to Brooklyn, greatly improving the desirability of the destination. However, on March 21 the New York Times reported construction could slow or halt the development completely, but did not go into specifics of how long the delay would last or how much construction would be stopped. On top of that, the retail report was released before recent events with the governor and Bear Stearns.
The report also ranked the relative supply and demand conditions at the market level of 43 cities using estimates from a list of forward-looking supply and demand indicators. NYC dropped to the fourth spot from the No.1 position of US cities in terms of retail desirability. The city dropped spots because employment growth slowed and vacancy rose. San Francisco, San Diego and Seattle moved to the first, second and third places respectively. Cities were ordered according to factors such as: forecast employment growth, vacancy, construction, household formation, retail sales, rent growth and additional analysis of local housing market conditions.
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