NEW YORK CITY—Although retail rents in Manhattan have slipped as of late, there are some silver linings to the downward trend, according to a new report by CBRE Group.

As Manhattan retail rents decline from historic peaks, tenants see more opportunities to participate in the market, the research states. At the same time, retailers are innovating new strategies to drive foot traffic to their stores and consumer interest in their brands.

Following a 92% surge in average asking rents between 2010 and 2014, evidence of rent moderation has been seen throughout Manhattan. The aggregate average asking rent across the 16 retail corridors tracked by CBRE has declined by 13%, to $954 per square foot, from the $1,090-per-square-foot peak in the third quarter of 2014.

Increasing rent made it difficult for many tenants to justify a presence in Manhattan, the report notes, while some retailers found they were unable to renew leases at market rents. Retailers once hesitant to enter Manhattan are now willing to seek space, attracted by current market conditions. Rental rate decline can be viewed as the market moving back to equilibrium rather than as an indication that the overall market is softening, the report concludes.

Despite decreases, landlords are still benefiting from rents near their historic high. However, retailers are finding they have more leverage in negotiating rent than in previous years. Landlords are becoming more flexible in rent structure, with concession packages more common. Additional incentives in the form of extended rent-free periods and softer escalations are also becoming more prevalent.

The evolving market is bringing in new retailers, while changing consumer tastes are creating different conceptions of retail. Luxury retailers that delayed their entrance into Manhattan have begun testing the waters. Tenants are becoming more innovative as they unveil experiential retail concepts, a trend evident across multiple retail categories.

Some examples of these new experiential stores include “athleisure” brands offering in-store exercise classes; NFL and Cirque du Soleil partnering to create an interactive NFL exhibition; and Lexus' new Meatpacking showroom, with its art gallery, café, event space and showroom.

These retailers are seeking space not only as a place for customers to purchase their products, but as a showcase for their brand, while also relying on traditional retail strategies to draw consumers into their stores, CBRE points out.

Long-term resilience across Manhattan retail is likely, driven by strong population growth, increasing household income and tourism as well as a diverse employment base. While post-election uncertainty is present, the report concedes, it is unlikely to dampen Manhattan retail's long-term prospects.

NEW YORK CITY—Although retail rents in Manhattan have slipped as of late, there are some silver linings to the downward trend, according to a new report by CBRE Group.

As Manhattan retail rents decline from historic peaks, tenants see more opportunities to participate in the market, the research states. At the same time, retailers are innovating new strategies to drive foot traffic to their stores and consumer interest in their brands.

Following a 92% surge in average asking rents between 2010 and 2014, evidence of rent moderation has been seen throughout Manhattan. The aggregate average asking rent across the 16 retail corridors tracked by CBRE has declined by 13%, to $954 per square foot, from the $1,090-per-square-foot peak in the third quarter of 2014.

Increasing rent made it difficult for many tenants to justify a presence in Manhattan, the report notes, while some retailers found they were unable to renew leases at market rents. Retailers once hesitant to enter Manhattan are now willing to seek space, attracted by current market conditions. Rental rate decline can be viewed as the market moving back to equilibrium rather than as an indication that the overall market is softening, the report concludes.

Despite decreases, landlords are still benefiting from rents near their historic high. However, retailers are finding they have more leverage in negotiating rent than in previous years. Landlords are becoming more flexible in rent structure, with concession packages more common. Additional incentives in the form of extended rent-free periods and softer escalations are also becoming more prevalent.

The evolving market is bringing in new retailers, while changing consumer tastes are creating different conceptions of retail. Luxury retailers that delayed their entrance into Manhattan have begun testing the waters. Tenants are becoming more innovative as they unveil experiential retail concepts, a trend evident across multiple retail categories.

Some examples of these new experiential stores include “athleisure” brands offering in-store exercise classes; NFL and Cirque du Soleil partnering to create an interactive NFL exhibition; and Lexus' new Meatpacking showroom, with its art gallery, café, event space and showroom.

These retailers are seeking space not only as a place for customers to purchase their products, but as a showcase for their brand, while also relying on traditional retail strategies to draw consumers into their stores, CBRE points out.

Long-term resilience across Manhattan retail is likely, driven by strong population growth, increasing household income and tourism as well as a diverse employment base. While post-election uncertainty is present, the report concedes, it is unlikely to dampen Manhattan retail's long-term prospects.