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Fall 2014 Retail Report
October 24, 2014
The Manhattan retail leasing market maintained its strength and dynamism through the third quarter of 2014. The Fall 2014 REBNY Retail Report showed ground floor asking rents increasing in 13 of 17 corridors surveyed, year over year. Furthermore, despite the increasing rents of recent years, our Retail Advisory Group reported that the market remained active. While the average asking rent in most corridors increased compared to last year, the increases were not as extreme as previous reports.
The average asking price for ground floor space on Fifth Avenue between 49th and 59th increased 8 percent from last fall to $3,420 psf. In Times Square along Broadway and Seventh Avenue between 42nd and 47th average ground floor asking rents increased 7 percent from last fall to $2,317 psf. Average asking rents in other prominent corridors increased strongly as well. Madison Avenue between 57th and 72nd streets had an increase of average ground asking rents of 24 percent to $1,709 psf. The average asking rent in Herald Square along West 34th Street increased 21 percent from last year to $891 per square foot.
The factors driving demand for retail space in Manhattan’s top corridors have not changed greatly. Tourism in the city is still strong, luxury brands are seeking association to select areas, and widely known global brands are looking for visibility in high traffic areas. Another factor that our Advisory
Group pointed out was that retailers now are looking for certain locations within these already high demand corridors besides simply corner space or a location near transit. Proximity to a major attraction in or near the corridor, they explained, can have a tremendous effect on desirability and price. For example, the available spaces on West 34th are more expensive closer to Macy’s than those on the other end of the block. The same holds true with the Financial District where retailers are looking to be close to The World Trade Center.
Another aspect influencing the retail leasing market according to the group is a retailer’s desire to make an impact in an area that gets them noticed and creates excitement around the brand. Examples of this are Saks moving to Lower Manhattan, Amazon taking space on West 34th, Nordstrom establishing a massive store at the base of the soon to be constructed 225 West 57th Street, and Neiman Marcus taking space at Hudson Yards for their first New York City store. These deals are the product of companies wanting to be a part of the changing city in general and leaving their particular mark on its vibrant retail environment.
We must reiterate that the rents quoted in the report are asking rents. Also, please note that the physical components of a retail space factor greatly into its rental value. Attributes such as street/avenue frontage, ceiling height, presence of below and above grade space can affect value as well as locational factors. Consequently, in corridors with fewer availabilities, a high quality space coming to market can increase the average and median asking rents greatly. Also, in smaller corridors, a lack of available space may lead its adjacent blocks becoming of interest to retailers. Accordingly, we have provided information about the rent range as well as asking rent information from six months and 12 months ago to provide a rich statistical context to evaluate the current market conditions. In addition, we would like to note that the surveyed corridors in the report represent the top tier retail corridors in the city and that rents on adjoining side streets may lease for considerably less than the locations we are profiling. Lastly, as we have learned in the decade or more that we have been preparing this report, retail brokers active in the market are an invaluable source of information and trends that cannot be fully captured completely by the numbers in our report. We attempt to provide an overview of the market at a particular point in time that is based on the available listings of our Advisory Group and the REBNY Retail Committee members which include all the major retail brokers and owners in Manhattan.