Better than expected sales tax receipts reflect continued retail recovery while also boosting City's balance sheets
NEW YORK, NY –The Real Estate Board of New York (REBNY) today released its Spring 2023 Manhattan Retail Report based on findings gathered from January to June 2023. The latest iteration of the biannual report shows steady growth in retail demand across the majority of Manhattan’s top corridors. In addition to being a bright spot in the New York City’s commercial real estate sector, stronger than expected sales tax receipts are giving the City’s balance sheet a boost. The full report can be downloaded here.
Retailers demonstrated their growing confidence in Manhattan’s appeal as a shopping destination in the first half of 2023. The last six months brought re-openings (although with smaller footprints) from Century 21 and the Upper East Side Barnes & Noble. Fashion, fitness and food & beverage retailers continued to expand. H&M leased its second SoHo location and LifeTime Fitness announced a major lease at Penn One in late June.
Better than expected sales tax receipts thanks to spending from area residents and more than 56 million tourists reflect a continued retail recovery while also boosting the City’s balance sheets. In May the New York City comptroller reported that sales tax in FY 2023 totaled $7.8 billion, up by 15% from the same period last year. The Comptroller increased forecasts for sales tax receipts in the next few years, which will help offset some declines in other tax revenues.
Retailers are responding to improving retail sales and attracted to rents that are still well below pre-pandemic peaks. Asking rent is at least 30% below its peak in 13 of the 17 corridors tracked in this report. REBNY Retail Committee Members note that more retailers are returning to the market with a revised business model that generally focuses on efficiency and often incorporates a smaller footprint. In the food & beverage sector this includes continued growth in rapid pickup options.
“The Manhattan retail market is coming to terms with a post-pandemic new normal. Retailers can no longer expect the steep discounts in rent and extraordinary lease provisions that were prevalent this time a year ago.” said Keith DeCoster, Director of Market Data and Policy at REBNY. “Even so, rent is still well below pre-pandemic peaks in nearly every neighborhood and both domestic and international retailers are eager to tap into Manhattan’s renewed status as a shopping destination.”
The report notes that storefront availability has tightened dramatically on Broadway in both Flatiron and SoHo, as well as Madison Avenue on the Upper East Side. Market conditions lag in a handful of office-dominant corridors critical to the City’s economy, like Second Avenue on the Upper East Side, several streets in Midtown East and Sixth Avenue. Active food & beverage business activity in Times Square has helped make up for still recovering fashion and entertainment sectors. Similarly, Fifth Avenue gained some notable flagship commitments but still has several key vacancies.
Looking forward, the report notes that the Manhattan retail market still faces fierce competition from several domestic luxury retail corridors. The repercussions of labor shortages and the impact of the pandemic to our office centric neighborhoods continue to present significant challenges. However, consumer spending and tourism have held up, despite concerns about inflation and the potential for a recession.
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The Real Estate Board of New York (REBNY) is the City’s leading real estate trade association. Founded in 1896, REBNY represents commercial, residential, and institutional property owners, builders, managers, investors, brokers, and salespeople; banks, financial service companies, utilities, attorneys, architects, and contractors; corporations, co-partnerships, and individuals professionally interested in New York City real estate. REBNY conducts research on various civic matters including tax policy, city planning and zoning, rental conditions, land use policy, building codes, and other city, state, and federal legislation. REBNY regularly publishes market data, policy reports, and broker surveys. In addition, REBNY provides for its members: informational, technical, and technological resources; networking and charitable service opportunities; qualifying and continuing education courses; professional education programs, seminars, and designations; career-changing awards; legal advice; and a wide range of additional member benefits. For more information, please visit www.rebny.com.