New York City's retail sector has continued to improve across all five boroughs, with increased consumer spending driving the recovery. According to a forecast from Marcus & Millichap, consumer spending in the Greater New York City market will increase 20% this year over 2019 activity, and the foot traffic has nearly returned to pre-pandemic norms.

The retail spending has translated to improved fundamentals for retail assets. Asking rents in Queens and Staten Island has already recovered to pre-pandemic levels and are currently approaching all-time highs for single-tenant assets. Due to widespread work-from-home policies, Manhattan and Brooklyn are further from full recovery than the outer boroughs, although office leasing rebounded significantly in January, illustrating the potential for recovery in these submarkets. As companies return to the office, retail foot traffic and spending is expected to follow.

In the interim, the Marcus & Millichap report recommends that investors seek mixed-use opportunities to hedge against uncertainty in retail in Manhattan and Brooklyn. In these markets, mixed-use properties are trading with yields in the low-4% to 5% range, roughly 100 basis points under the current market average, according to the report. In the outer boroughs, however, single-tenant deal dominated, reaching a multi-year high.