Spring 2021 Manhattan Retail Report


Executive Summary

Market Commentary

The REBNY Manhattan Retail Advisory Group expressed cautious optimism regarding the direction of the New York City economy and real estate market in the first half of 2021. Conditions remain far from normal, but they are improving.

The biggest turnaround from six months ago is that vaccination rates in New York City are approaching the critical 70% threshold. In turn, restrictions are shifting from mandated to optional. Tourist sightings are rising. In turn, hotel occupancy rates are increasing. According to the Hotel Association of New York City, Manhattan hotel occupancy rose to 45.9% in April, an increase from 28.4% in April of 2020.* Additionally, the slow return of more workers to offices is boosting average daily subway ridership above 2.3 million.** The trickle of tourists and office workers is injecting much needed life into day time commuter/transit oriented retail corridors. Small businesses that were hit particularly hard by the pandemic can take heart in these positive trends.

Retail Advisory Group members noted rising interest and demand from retail tenants. Leasing velocity slowly improved. These green shoots indicate growing confidence among some retailers in the city’s comeback. It is also a response to the tenant favorable conditions prevailing in most areas. Even where landlords are not adjusting asking rents, they are offering more tenant improvement allowances, free rent, percentage clauses as well as flexibility on renewal and term clauses.

The current market offers tenants ample availability and reduced leasing costs. Some firms recently capitalized on the conditions. This includes international retailers such as Pinko, which inked a 4,925-sf sublease in SoHo, and Timothy Oulton in the Flatiron District.

Additionally, an array of smaller service-oriented retailers such as dry cleaners, dance studios and barber shops are locking in favorable terms or shifting to better locations.

By the Numbers

The Spring 2021 Manhattan Retail Report underscores a market that continues to adjust – 16 of the 17 corridors registered a year-on-year decrease in asking rent. The pace of the rent adjustment is moderating, though.

The pandemic impacted every corner of Manhattan. However, the damage to retail corridors was uneven. Local service-oriented corridors with strong residential bases held up better. For example, compared to Spring of 2019, the average asking rent dropped by less than 15% in the Upper East Side. In contrast, corridors that depend on tourists and daytime commuters – such as Madison Avenue and Fifth Avenue – posted declines of more than 25% in the same period.

SoHo’s decrease in average asking rent is nearly 40% - the recent spate of leases by international retailers suggests these firms have taken note of the opportunities.

Market Outlook

Signs of a nascent recovery are tempered by the reality that traffic in most retail corridors is far from approaching pre-pandemic levels.

The progress remains vulnerable to any additional public health or safety setbacks. Sustained momentum requires an accelerated return of employees to the office, the resurgence of tourists and the opening of cultural and entertainment venues. Over the next six months, we should see these drivers of retail growth improve.