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Fall 2012 Retail Report
November 19, 2012
The Manhattan retail market remains strong, as there is increased demand and limited supply, particularly for space in the high profile retail corridors. Contributing factors are the slow improvement in the economy, the uptick in consumer confidence and the strong tourism in NYC.
With increased competition for the minimal available space in key locations, rents in those areas are at all time highs. This has led to a softening of the boundaries, and tenants are now willing to consider space beyond what had traditionally been targeted.
For example, at one point 49th Street was considered the dividing line for the Fifth Avenue market, and asking rents dropped significantly south of 49th Street. However, this retail corridor is evolving. More and more, members of our Advisory Group are reporting the willingness of high profile retail tenants to rent stores between 42th – 49th Steet due to the high volume of tourist and potential customer traffic. . As a result, the average ground floor asking rent in these corridors has been rising.
In time, our Advisory Group projects the retail stores south of 42nd Street will see an increase in asking rents, as tourists continue to walk south on Fifth Avenue linking 42nd St. and 34th St and beyond down to the Flatiron District.
It is important to recognize that the asking rent for ground floor space in the retail market is based on a broad range of important factors, with consideration of physical components such as <street frontage, depth of store column spacing,, ceiling heights , possible addition of mezzanine or lower level selling space; as well as accessibility to mass transportation. All of these factors affect the value of a space. Similarly, in these major retail corridors often small spaces can command higher ground floor asking rents which can increase weighted average asking rents within retail corridors. Equally critical are whether the location is in an emerging market, the owner’s and the broker’s vision for the future of the neighborhood and can/ should the area support the increased customer base which can lead to increased retail asking rents.
When we issued our initial report in the Fall of 2000, there was little interest by national retailers in Lower Manhattan, the Flatiron district, and the Meatpacking area. Today, these markets have emerged with their unique appeal to retailers which has led to major increases in asking rent, along with higher occupancy. Retail corridors evolve and grow reflecting the changing nature of our city. The rise in asking rents we are seeing in certain corridors is evidence of the ever changing .retail scene.
The data for this report was based on market conditions prior to Hurricane Sandy. Undoubtedly, the storm has had a temporary impact on the retail market in lower Manhattan. Regardless, the attractiveness of Lower Manhattan has not abated. The neighborhood continues to grow in population, with both increased residents and workers and continues to develop as a 7 day a week location. Not to be forgotten, even more hotels, attracting more visitors, are opening in Lower Manhattan to fill the need as tourism continues to increase downtown. The retail to be available at the World Trade Center, World Financial Center/Brookfield Place and the South Street Seaport will all create a lot of activity. Downtown has a bright future ahead
Our report is intended to be a snapshot of the market at a particular point in time and a comparison with the market six and twelve months earlier. However, as our Advisory Group points out and our neighborhood data affirms, the secondary and tertiary retail markets based on overall asking rents per square foot continue to improve as well.