No Crisis Thus Far for NYC Retail

Despite the economic downturn, Manhattan’s retail market is showing surprising strength, as least as evidenced by current asking rents, according to a survey released by the Real Estate Board of New York. Although the retail market has been slowing over the past several months, overall asking rents for Manhattan retail space as of Sept. 30 were down only 3 percent from a year ago. In addition, asking rents in some corridors and submarkets were up dramatically. On the East Side, for example, the overall average asking rent for retail was up 11 percent from a year ago, to $190 per square foot. Midtown South showed a 6 percent increase, to $111, and Downtown was up 1 percent, to $110. “[T]he increases in asking rents in prime areas like TriBeCa, Herald Square and the Upper West Side demonstrate that retailers still want to be in Manhattan, REBNY president Steven Spinola said in a prepared statement. “Despite the turmoil in the marketplace, asking prices for prime retail space in Manhattan’s most recognizable shopping areas have not been impacted.” “The continuing strength in the retail market is demonstrated by the average asking rent for ground floor space in the major retail corridors,” the report noted. REBNY senior vice president Michael Slattery told CPN that ground-floor space tends to drive the overall price of retail space. About a pattern in the study’s results, he said, “the general sense is that the traditionally strong markets are still doing well.”In general, the biggest winners, based on the largest percentage increases in average asking rents for ground floor retail space, were • TriBeCa, Hudson Street from Chambers to Canal streets: Up 60 percent to $120 per square foot. • Herald Square, West 34th Street between 5th Avenue and 7th Avenue: Up 38 percent on to $643 per square foot.• The Upper West Side, Broadway between 72nd Street and 86th Street: Up 17 percent to $309 per square foot. Asking rents for ground-floor retail in some prime shopping corridors saw declines from last year, however:• Flatiron, Fifth Avenue between 14th and 23rd streets: Down 7 percent to $276 per square foot. • The East Side, Third Avenue between 60th and 72nd streets: Down 6 percent to $287 per square foot. • Midtown, Broadway and 7th Avenue between 42nd and 47th streets: Down 3 percent to $775 per square foot. Noting that the figures are from a six-month period that ended before the financial and credit markets crisis of October, the report pointed out, however, that “asking prices do not fluctuate like stock prices,” and “we should not necessarily anticipate any dramatic shifts over the next few months.” The report also stated that if the Manhattan retail market softens further, owners are likelier to increase free rent periods or tenant work allowances than they will be to lower rents. The next concern, which will presumably be answered by the survey coming out next spring, Slattery said, is how things will look after the coming holiday season. Produced semi-annually for the past nine years, the report is the most comprehensive assessment of retail asking rents in Manhattan and is based on information submitted by up to 80 companies represented on REBNY’s Retail Committee.