Retail rents in Manhattan are softening, even on Madison and Fifth Avenues.
That’s according to a just-released fall 2015 report from the Real Estate Board of New York, which indicates that in the Madison Avenue corridor between 57th and 72nd streets, the average asking rent fell 6 percent from $1,709 per square foot to $1,613, year-over-year. The last year-over-year decline on Madison Avenue was in the fall of 2012 when rents fell 2 percent from fall of 2011, according to the REBNY.
On Fifth Avenue, the average asking rent for ground floor space between 49th and 59th Streets, considered Fifth Avenue’s most desirable retail stretch, was $3,397, a 1 percent decrease from $3,420 last year. The board explained that there isn’t that much available on Fifth Avenue so it hasn’t been susceptible to the declines that other corridors with more inventory have experienced.
Five other “premier” retail corridors analyzed by REBNY also saw declines, marking a break in what’s been a steady increase in rents for years.
Despite the declines, REBNY said deals are getting done and retailers are making commitments rather than delaying decisions. Also, none of the declines were greater than 6 percent.
“Manhattan is continuing to achieve robust asking rents and experience strong leasing activity, particularly in retail corridors experiencing significant residential development and a resurgence of neighborhood vitality,” said John Banks 3rd, president of REBNY. “New York City is one of the world’s greatest shopping destinations and the softening of retail rents over the last several months has provided an opportunity for retailers to make moves.”
“According to our retail advisory group, the softening we’re experiencing, particularly in the Madison Avenue corridor, is symbolic of current market trends and not emblematic of any weakening of interest in this corridor, or changing market fundamentals in the corridor,” said Michael Slattery, senior vice president for Research at REBNY. “The decrease is instead owed to the increased amount of supply available in the corridor and landlords becoming eager to keep their spaces occupied.”
In addition, luxury sales have been difficult due to the strong dollar, the decline in tourism and a shift in spending by the general population away from fashion and apparel to higher-ticket items, home improvements, restaurants, vacations and other types of experiences.
Other parts of Manhattan seeing rent declines included Broadway on the Upper West Side, where asking rents with ground floor space between 72nd and 86th streets decreased 4 percent to $361 per square foot; and Herald Square, which saw a 6 percent decrease in ground floor average asking rents year-over-year to $836 per square foot.
But retail corridors that saw rent gains are those experiencing residential development, including Midtown South, especially in the Broadway Flatiron District between 14th and 23rd streets, where the average asking rent increased 42 percent to $510 per square foot. East 57th Street, between Fifth and Park Avenues, experienced a 28 percent average asking rent jump to $1,600; Third Avenue, between 60th and 72nd streets, jumped 26 percent to $335 per square foot, and the Broadway financial district, between Battery Park and Chambers Street, increased 16 percent from last fall to $308 per square foot.
REBNY’s retail report, compiled in the fall and again in the spring each year, draws its rent information from a cross-section of retail brokers. REBNY is a real estate trade association with more than 17,000 members.