Manhattan Retail Rents, Leasing Velocity Rise in Q1
International travel, demand for luxury goods drives strong start to 2023.
A rebound in international tourism and improved consumer demand in the luxury and entertainment sectors propelled Manhattan’s retail market to a stronger start than a year ago in the first quarter.
In Q1 2023, average asking rent in the prime 16 retail corridors increased for the third consecutive quarter to $638 per SF, up 3.7% from Q4 2022 and 8% higher than a year ago, according to CBRE’s new Manhattan retail report.
The number of direct ground floor availabilities dropped 7.2% from the prior quarter to 206 spaces, a 16.6% reduction YOY—and the seventh consecutive quarter ground-floor availabilities have decreased. The rolling four-quarter aggregate leasing velocity improved to 2.8M SF in the first quarter, up 5.4% from Q4 2022.
“While strong consumer spending near the end of 2022 may have exuded positive momentum into the first quarter of 2023, continued supply chain complexities and economic uncertainty are expected to present a challenge for retailers over the next several quarters, which could slow progress in New York’s retail landscape,” CBRE’s report said.
The taking rent index for the prime 16 retail corridors in Manhattan was 75.5%, up 310 bps from the fourth quarter.
New York City Tourism + Conventions, the city’s tourism board, anticipates more than 63M travelers arriving in Manhattan by the end of 2023—a 12.2% increase over the 56.4M visitors to the Big Apple in 2022, CBRE said.
In Q1 2023, contemporary brands and luxury tenants were active in seeking new locations in Flatiron and the Plaza District. While demand for prime spaces continues to rise, leasing demand remains nearly 32% below the pre-pandemic peak of 4.1M SF in Q2 2019, the report said.
The Flatiron/Union Square neighborhood recorded the highest leasing velocity of the quarter with more than 100K SF leased across 12 transactions. The Plaza District recorded the second highest leasing volume in the first quarter as the Italian luxury fashion brand LVMH signed a new lease at 4 East 57th Street.
The Upper Madison Avenue corridor also recorded a significant decline in ground-floor availability, dropping 5.9% quarter-over-quarter and 23.8% YOY to 32 spaces.
The apparel industry leased more retail square footage in Manhattan than any other industry, encompassing 242K SF across 27 transactions. Food and beverage was the most active tenant category by number of deals in Q1, with 41 transactions encompassing about 150K SF.
The 14th Street corridor in the Meatpacking District was one of the only markets to record both an annual and quarterly increase in availability as the number of spaces grew by 6.7% compared to the fourth quarter.