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Retail rent dip is not a sign of weakness
December 2, 2015
REBNY recently released its Fall 2015 Manhattan Retail Report, which showed a slight softening in the asking rents of the borough’s premier corridors. Asking rents decreased in 7 of the 17 surveyed corridors, although none of the decreases were more than 6 percent. In the 10 corridors where the average asking rent increased compared to the Fall 2014 quarter, the percentage increase was modest compared to previous reports.
Some of these decreases, such as the notable 6 percent decrease in the Madison Avenue 57th-72nd corridor, were not a result of weakness or loss of interest in the corridor, but instead due to a combination of the amount of supply available in the area and landlords setting asking rents that will attract tenant interest. The 4 percent decrease in asking rents in Broadway on the Upper West Side is an example of this supply driven drop. In fact, the increase in supply was a factor in all of the corridors where rents fell, except one.
Areas with an increase in residential development and a resurgence of neighborhood vitality, such as the Financial District, continued to be the corridors in the borough with increases in asking rents. The Financial District has been seeing significant changes recently, with infrastructure upgrades including the Fulton Transportation Hub, new shopping areas, dining options around the World Trade Center, and the addition of Brookfield Place. Ground floor retail asking rents along the Broadway Financial District corridor saw a 16 percent increase this quarter as a result. Midtown South is undergoing a similar transformation, with the Broadway Flatiron District between 14th and 23rd average asking rent increases of 42 percent compared to last fall.
REBNY also recently released its most recent Broker Confidence Index, a comprehensive report which includes the responses to our eight question survey from REBNY’s brokers, both residential and commercial. This quarter’s overall Confidence Index dropped one half-point from last quarter to 8.34, while confidence in the market six months from now was also positive, registering at 7.87, though lower than last quarter.
Both residential and commercial brokers shared similar concerns regarding the current market, citing variables such as rising interest rates and lack of inventory as factors continuing to temper their confidence both today and six months from now. Commercial brokers in particular also cited concerns related to the national and international economies as influencing their confidence in the market going forward.
The Commercial Broker Confidence this quarter was a positive 8.85, with the confidence in the market six months from now being 8.17. For residential brokerage, the Confidence Index was 7.83, with brokers pointing out that the Brooklyn and Long Island City market is experiencing an inventory boom and experiencing strong price growth. Despite a dip in confidence levels compared to last quarter, both residential and commercial brokerage confidence continue to remain high, with some level of uncertainty in the market six months from now.
To view the full text of either of these reports, please visit www.rebny.com.