Manhattan Retail Rents Notch First Rise Since 2016

In what retail landlords hope is a turning point, the average asking rent in the prime 16 retail corridors of Manhattan saw a quarterly uptick of 2.2% to $607 per SF—the first increase after 18 consecutive quarters of decline, according to CBRE’s Q3 report for Manhattan’s retail market.

The sudden pulse in average asking rents—the first increase since 2016—came as Manhattan’s prime corridors saw reduced vacancies in Q3. Direct ground-floor availabilities dropped 5%, from 241 to 229 spaces—the fifth consecutive quarter that the number of direct ground-floor availabilities tracked across Manhattan’s corridors has declined.

CBRE reported that the taking rate index for the prime 16 retail corridors in Manhattan jumped for the second consecutive quarter in Q3 to 72.2%, up from 69.5% in Q2 and at its highest level to finish a quarter since Q3 2019.

Leasing velocity in Manhattan’s retail sector totaled 2.7M SF, the best quarterly total since Q3 2020, CBRE’s report said. The surging velocity reflected a 53.1% improvement over Q3 2021 and was 2.6% better that Q2 2022.

“Improving conditions reflect the continued recovery of demand, as more workers returned to their offices post-Labor Day, and tourism and entertainment sectors also rebounded,” said Nicole LaRusso, CBRE senior analyst and author of CBRE’s Q3 Manhattan retail market report.

“This good news was tempered, however, by rising interest rates and the prospect of a recession, as job losses and reduced consumer spending could put Manhattan’s retail recovery at risk,” LaRussa cautioned.

The frontage availability rate for Manhattan’s main retail corridors saw a 90 bps decrease to 19.1% from the 20% availability rate recorded in Q2 2022.

According to CBRE’s report, the most active Manhattan neighborhoods in terms of retail leasing activity in Q3 were Grand Central, with five deals encompassing 69K SF; FlatIron/Union Square, with 12 deals encompassing 57K SF; and Chelsea, with four deals encompassing 39K SF.

The most active tenant types were food & beverage retailers and apparel vendors, with 15 and 10 deals, respectively, in the third quarter.

The top Q3 retail lease transactions in Manhattan included Michael Stores 34K SF lease at 685 Ave. of the Americas in Chelsea and Immersed in Wonderland’s 29K SF lease at 529 Fifth Ave. in the Grand Central district.

The rolling four-quarter aggregate leasing velocity, which measures total leasing (renewals and new leases) for the four prior quarters—a good metric to assess the scope of the overall recovery of Manhattan’s retail sector—was 2.4M SF, up 10% from the prior quarter and 50% from the same period last year.

CBRE noted that NYC in September tightened the deadline for retail landlords to report empty spaces, adding a requirement that they now report their last lease expiration. The new rules are a recently passed amendment to 2019’s Local Law 157, which established NYC’s public storefront registry to track commercial vacancies in the retail sector.

Manhattan’s retail job count remained unchanged in Q3 at about 305K jobs, CBRE said.