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Economic upswing driving up rents on prime retail corridors
May 22, 2013
President, Real Estate Board of New York
Manhattan’s high-profile shopping corridors are experiencing rising asking prices in the last six months, according to The Real Estate Board of New York’s Spring 2013 Retail Report.
There are several factors that continue to drive interest in the prime corridors, mostly pedestrian and tourism traffic, the desire for a prestigious address and brand association. REBNY’s Retail Advisory Group reports a lot of interest from luxury and fast fashion brands and tenants from Europe, Asia and South America, who are eager to gain a foothold in the city or expand their already-established presence.
These retailers have been vying for limited space in prime corridors, where asking rents are already high and continue to creep up. According to REBNY’s report, average asking rents saw the biggest jumps along the following corridors:
- Lower Fifth Avenue (between 42nd and 49th streets), rose 21 percent since spring 2012 to $1,092 per square foot (psf).
- The Flatiron shopping corridor along Broadway between 14th and 23rd streets saw a significant increase in asking rents with a 50-percent-increase to $322 psf since last spring.
- Similarly in the Flatiron corridor along Fifth Avenue between 14th and 23rd streets, asking rents also rose 37 percent to $413 psf since spring 2012.
- Asking rents in Times Square on Broadway and 7th Avenue between 42nd and 47th streets jumped 55 percent to $2,175 psf as a result of limited supply and our robust tourist economy.
REBNY’s Spring 2013 Retail Report compiles data about asking rents for available space provided by a broad cross-section of the city’s leading retail brokers. Each year, the report is compiled in the spring and fall.
Rising asking rents in traditionally prime corridors such as Upper Fifth Avenue are indicative of a strong market. We haven’t seen any actual transactions close in the corridor from 50th to 59th Street between fall 2012 and March 31, 2013, which is the data closeout date for our report. That is because this area has some of the best space available for a large flagship location, so property owners are willing to wait for the right tenant and the right price, according to REBNY’s Retail Advisory Group.
As a result, less supply and rising rents in the most exclusive corridors has led retailers to become more interested in space on the edges of such corridors. This has been apparent on 5th Avenue where tight conditions between 49th and 59th Streets have led to more interest in 5th Avenue between 42nd and 49th Streets. Since last spring asking rents in that corridor have increased 21 percent to $1,092 psf.
Stores on Madison Avenue between 57th and 72nd Streets have been playing a form of retail “musical chairs,” where lease transactions are taking place before space comes to market. Some examples of this are Berluti moving from the 70s to the former Anne Fontaine store between 61st and 62nd Streets; J.Mendel relocating three blocks north from 723 Madison to double its size at 787 Madison; and Loro Piana expanding into an adjacent space on the Avenue. As these retailers satisfy their space needs, they are demonstrating a commitment to an area that has been successful for their business.
Additionally, Midtown South has benefitted from the strong office market, aided by the expanding tech sector and new residential development. This activity has generated increased foot traffic as well as increased demand for high-quality shopping options.
Rising consumer confidence, an improving job market and a growing economy have all contributed to driving up the asking prices for the last six months in Manhattan’s high-profile shopping corridors.
For the full report, visit www.rebny.com.
In other REBNY News:
Don’t miss when New York City Mayor Michael Bloomberg will be the keynote speaker at REBNY’s 10th annual Commercial Management Leadership Breakfast on Thursday, May 30th from 7:30 to 10 am at the Hilton New York, 1335 Avenue of the Americas. Each year, commercial building owners and professionals recognize the achievements of the industry and unmatched individuals. Edward V. Piccinich of SL Green Realty Corp. will receive the Edward A. Riguardi Commercial Manager of the Year Award. We will also present nine other awards at the breakfast, including the: John M. Griffin Community Service Award; Outstanding On-Site Manager Award; Outstanding Portfolio Manager Award; Small Buildings Engineer of the Year; Large Buildings Engineer of the Year; Security Professional of the Year; Porter of the Year; Rising Star of the Year and a New Category – Best Engine Room. Sponsorship opportunities are still available. Please register online at www.REBNY.com. For more information, contact Cindy Ramotar at firstname.lastname@example.org.
Come help celebrate the Retail Deal of the Year Awards presented by REBNY’s Retail Committee at the 15th Annual Cocktail Party from 5:30 to 7:30 pm on Tuesday, June 11 at the 101 Club, 101 Park Avenue. It is the real estate industry’s highest honors for commercial retail brokers. Tickets are $50. Register online at www.rebny.com. For more information contact Desiree Jones at email@example.com.
Tennis players are still needed for REBNY’s Annual Golf & Tennis Outing on Monday, June 10 at the North Shore Country Club. Come and enjoy a great day of fun, food, drinks and prizes. Register online at www.rebny.com. For more information, contact Kathleen Gibbs at firstname.lastname@example.org or 212-616-5246.