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Spring 2022 Manhattan Retail Report
May 20, 2022
Manhattan’s retail sector gained traction during the last six months, improving from the prior reporting period. The increased velocity was due to significant absorption in several key corridors. Rent is stabilizing in many areas, but remains well below pre-pandemic levels.
Brokers expect increased lease completions for the balance of 2022. That said, retailers continued to be challenged by construction inspection and licensing delays, as well as supply chain dysfunction that impedes lease completions and business openings.
Sustained Leasing in Multiple Corridors
The long list of new store openings and leases underscores the continued release of pent-up demand. The biggest improvement in the last six months occurred in Manhattan’s largest retail corridors like Madison Avenue and SoHo. Tenants were very active in Flatiron and the West Village as well. Times Square and Fifth Avenue also secured a few noteworthy leases.
Array of Retailers Committing to Leases Suggests Demand is Gaining Momentum
The types of retailers completing leases is expanding. Luxury fashion and accessories, national chains and new direct-to-consumer niches, all see increasing leasing activity. Within new emerging concepts like wellness/biohacking or cannabis dispensaries, it is no longer just one or two well-funded companies – multiple firms are expanding operations.
Availability of Best Spaces Depleted in Several Corridors
Prime retail spaces continue to lease at an aggressive pace in corridors with steady foot traffic. Office-centric locations continue to lag behind residential areas or locations benefitting from improved tourism.
Rent Declines and Lease Workouts No Longer the Norm
Rent is finding its footing and lease terms are normalizing in more areas. After several years of consistent rent declines and creative deal structures during the pandemic, landlords are less willing to consider short-term leases. More landlords pulled back from the most aggressive incentives and unorthodox lease structures, but remain open to creative solutions. Landlords continue to offer generous free rent periods or cash to pursue quality retailers. Average asking rent rose in nine of the 17 corridors, but is still below its pre-pandemic peak in every corridor.
Supply Chain Issues, Permitting/Inspection Delays Impede Lease Completion
The extraordinary lease clauses and accommodations of 2020 and 2021 are disappearing, but retailers and landlords are working out issues surrounding the latest set of challenges. Supply chain dysfunction, for example, is delaying openings and build outs.
Tenants note difficulty securing a long list of key items ranging from deep fryers to custom upholstery. Staffing continues to be a difficult challenge along with delays in obtaining construction permits and the completion of inspections.