The Real Estate Board of New York on Wednesday released its fall 2018 Manhattan retail report, and it basically amounted to a lump of coal for landlords.
Average asking rents in 15 out of 17 retail corridors in Manhattan declined, a trend that the organization noted has been widespread since spring 2015. The 17 corridors’ average overall decline was 25 percent compared to fall of 2015, with 10 areas showing decreases of over 20 percent, and three over 30 percent.
Two locations logged increases in rent, Broadway between 72nd and 86th streets, where rents notched up five percent, and Harlem along 125th Street between Fifth Avenue and Morningside Avenue, which posted growth of 13 percent.
East 57th Street between Fifth Avenue and Park Avenue showed the steepest decline, 29 percent for fall 2018, after dropping 5 percent in the spring, and Madison Avenue in the fall posted its seventh consecutive year-over-year drop of 14 percent to $1,160 a square foot. However, the report doesn’t mention the recent deals done on Madison Avenue, including Balenciaga at Nos. 610 to 620, and Celine at 650, which points to leasing gaining momentum.
Fifth Avenue between 49th Street and 59th Street declined 24 percent both in fall 2018 and spring of 2018, compared with the same periods last year. The average asking rent for the corridor was $2,973 per square foot. REBNY said the drop was caused by increased availability and noted that when space is more limited, rents register at the higher end of the market.
The corridor further south along Fifth Avenue between 42nd Street and 49th Street, continues to be challenged, registering a 19 percent drop for fall 2018 versus fall 2017, and a 14 percent decline for spring 2018 compared with spring 2017.
“A natural correction has been well under way,” REBNY said in the report. “Lease terms are more flexible, owners are accepting more short-term deals, improvement allowances are more generous, and retailers are trying different concepts for the new retail market before they agree to a long-term deal.” REBNY was referring to both retailers and owners facing a new retail environment where the popularity of online and digital has made driving traffic to stores harder for retailers.
On Bleecker Street between Seventh Avenue South and Hudson Street, rents declined 17 percent. It’s still early days for Brookfield Property Group’s strategy to revitalize the thoroughfare, where it acquired seven storefronts. Brookfield opened a store for Prabal Gurung and is incubating local and regional businesses in other shops.
East 86th Street from Lexington Avenue to Second Avenue gave up 19 percent for fall compared with fall 2017. Rents in the Herald Square area along 34th Street, fell 9 percent; Fifth Avenue in the Flatiron District, 13 percent, and Flatiron’s Broadway corridor, declined 2 percent. Average asking ground floor rents on 14th Street in the Meatpacking District were down 6 percent for fall versus 2017’s period.