2023 Marked a Strong Year for Manhattan Retail with Growing Activity, but Select Areas Remain the Most Competitive
At a time when Manhattan’s office sector faces substantial challenges and residential sales are slowing, the retail sector remains a relatively bright spot. Leasing continued to be the most competitive in preferred neighborhoods including SoHo, Madison Avenue, and Flatiron. Activity has improved but been less intense in areas like Times Square, Upper Fifth Avenue, and Midtown East.
Manhattan’s retail market did well compared to other segments of the real estate market. Even so, activity and rent levels still fall short of those levels attained prior to the pandemic. This is the case in a large part because two key drivers of retail demand remain subpar.
Tourism is about 10% below 2019 peak volume, and office visitation is reduced from pre-pandemic norms. Additionally, retailers face persistent challenges to business set up and operations, including acute staff shortages, lengthy permit and buildout schedules, quality of life issues, and much higher borrowing costs. Most retailers are sticking to more efficient business models and store footprints; however, several luxury retailers as well as food and beverage tenants have absorbed larger stores in recent months.