NYC Retail Sees Highest Leasing Velocity Since 2017

Increasing subway ridership in New York City is among the factors helping to boost that market’s retail traffic as the country’s largest city looks to put Omicron behind it.

Ridership rose to pre-Omicron counts by early April, and should maintain this upward trend moving forward, Marcus & Millichap said as part of its Q2 New York Retail Market Report issued this week.

Bridge and tunnel usage suggests that an additional portion of commuters have returned to office districts, but are entering the city via personal vehicles as extant health risks influence transit choices. Spikes in tourism are also factors in overall improvement.

With this, “foot traffic to nearby retail should follow, increasing vendor competition for prime space and bolstering rent recovery in core areas of Manhattan,” Marcus & Millichap said.

Sit-Down Restaurants, Luxury Retail Thriving

Stephanie Jennings, managing director, National Research, Newmark, tells GlobeSt.com that active requirements “have improved dramatically from the pandemic in volume and diversity of tenants, notably among sit-down restaurants and luxury retail.”

She said that trade areas with a significant number of residents are seeing the greatest improvement, with the availability rates of SoHo, the Upper East Side, and the Upper West Side lower than pre-pandemic levels (1Q20).

Ariel Schuster, vice chairman, Newmark, tells GlobeSt.com that the retail sector in NYC is thriving amidst the return to office and an incremental growth in community engagement post-COVID. 

“As of late, we’ve seen a huge uptick in activity across the sector—leasing velocity is at its highest level since 2017—and we expect that trend to continue well into 2023.”

However, perceived health threats could create headwinds to a full recovery, as some consumers may reconsider non-essential public transit usage, according to Marcus & Millichap’s report.

New Brands Find Rents at Value Levels

Brands that are coming and going are creating new options for patrons, as “opportunities emerged for national brands to establish footholds in the market at a lower cost than the historical average,” the report said. 

“The average asking rent has declined in some prime corridors as desirable spaces are filled and taken off the market, but competitive leasing should spur rent gains in remaining storefronts as tenants explore alternative options.”

For one, large-scale franchises such as new favorite Southern eatery Raising Cane opened its first New York venue in Midtown Manhattan.

The report said converging cap rates on multi-tenant and single-tenant properties may incentivize some yield-driven investors previously specializing in multi-tenant assets to incorporate single-tenant retail into their portfolios. Trades in the mid-7 to 8 percent band are not uncommon.