"Once again, New York is running counter to the rest of the country," says Hodos, EVP with CBRE's New York tri-state region retail services group. "Manhattan stores are holding their own, and in some cases they're up, largely due to the dollar situation with the euro and the pound and the extent of tourism. I think we have more tourists now than we've ever had. That has kept Manhattan very buoyant and very steady in terms of retail sales."
Particularly on the avenues and major thoroughfares, "there has been no softening whatsoever," Hodos says. "I think we might be in a plateau in terms of rents, but they certainly aren't falling. There's not vacancy, and particularly in Manhattan, we need vacancy for an extended period of time before rents actually fall. There is some more negotiability on side streets—secondary or tertiary locations—and they're being repriced a bit. But on the major thoroughfares and avenues, rents are as high as they've ever been."
Any vacancies that do occur don't last long on those prime thoroughfares. "When a space is available, sometimes there are offers even before it's on the market," says Hodos. "In those kinds of locations, where the space is priced properly, they go very quickly."
From a national perspective, both the International Council of Shopping Centers and the National Retail Federation earlier this month reported declines in March same-store sales. Specialty apparel chains such as the Gap were particularly hard-hit, according to ICSC. Hodos comments, "There are parts of the country that are truly hurting. It largely relates to where there are lots of foreclosures. The state of Ohio is hurting, and there are areas of southern California that are hurt pretty badly. Arizona is another example, although the better malls there, like Scottsdale Fashion Square, are doing extremely well. So it's a bifurcation: people at the high end don't seem to care; they haven't stopped spending. It's the people in the middle that are getting squeezed."
With that said, he adds, "There are some bright spots throughout the country. Along the Canadian border, there are lots of Canadians crossing into states like Michigan and Wisconsin and shopping in American malls. Victoria's Secret has had exceptional comp-store sales growth in all of its US stores that are near the Canadian border."
Hodos says the future of retail performance in the region "largely depends on what happens with the financial services sector in Manhattan. It extends to employment, Wall Street bonuses and those kinds of things."
One factor that has bulked up Manhattan retail rents has been the proliferation of bank branches—and that same factor could also be a catalyst for softening rents if more banks merge. "There's a bank branch on every corner; the banks came in and if the asking rent was $200 per sf, they paid $300 per sf," says Hodos. "They paid to get locations and build market share. If some of those bank branches come up for sublease and a lot of them come on at the same time, that could affect the market."
Notwithstanding these scenarios, Hodos says he can't predict what's going to happen. "There are doom-sayers out there who will tell you the sky is falling, and yet I don't see it today."
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
