A person wearing a protective mask stands near a “Store Closing” sign outside a retail store in New York City.
Noam Galai | Getty Images
New York City retail space rents have fallen to all-time lows, down as much as 25% from 2019, as troubled retailers like Neiman Marcus and Century 21 spiked closed stores and vacancies, according to a report on Friday.
The Real Estate Board of New York semi-annual report found that retail rental demand across Manhattan declined in fall 2020 in all 17 corridors, including pockets along the Upper East Side, West Village, and downtown.
Eight areas had the lowest median asking rents in at least a decade, including SoHo, Upper Madison Avenue, and Upper Fifth Avenue. REBNY also noted that 11 corridors have seen available retail space increase from 6% to 67% since 2019, reflecting a “significant slowdown in Manhattan retail transactions” during the coronavirus pandemic.
“Historical rent declines in Manhattan’s best-known retail corridors show how much the market has adapted in the face of the unprecedented impact of the Covid-19 crisis,” said James Whelan, President of REBNY.
In New York City’s most expensive retail district, along Fifth Avenue from 49th to 59th Streets, average asking rents fell 8% to $ 2,618 per square foot, according to REBNY. There are a number of high-end retailers in this area, including Saks Fifth Avenue, Cartier, and Versace Tiffany. More recently It has seen several companies leave because they can no longer afford the sky-high rent. The new numbers represent a 32% decrease from the corridor’s prime rent in spring 2018, REBNY said.
People walk past a sign posted outside a retail area for rent as the city resumes Phase 4 reopening after restrictions were imposed in New York City on August 26, 2020 to slow the spread of the coronavirus.
Noam Galai | Getty Images
Along Broadway in SoHo, from Houston to Broome Streets, average asking rents suffered the largest drop of any corridor, falling 25% year-over-year to $ 367 per square foot, REBNY found. This corresponds to a decrease of 62% compared to the highest level of the corridor in spring 2015.
The turmoil caused by the health crisis was particularly tough on SoHo, which has always been considered one of the most influential shopping districts in the country. It is often the neighborhood where international brands open their first US stores or where online startups like sneaker brand Allbirds and luggage maker Away first tried to expand offline.
According to Mark Dicus, executive director of the Soho Broadway Initiative’s business improvement district, vacancies in SoHo rose from around 19.5% at the beginning of 2020 to around 33% by the end of December.
Thirty-two locations in SoHo were permanently closed last year, with about half of those closings occurring around the time New York ordered all non-essential stores to close.
“Recovery will take years, not months,” said Dicus. “SoHo is uniquely positioned to continue to be this authentic neighborhood and place to shop in New York, but it will be some time before those investments are made again.”
On Bleecker Street, from 7th Avenue to Hudson Street, average asking rents fell 9% to $ 252 per square foot. This is the lowest REBNY has ever recorded for the area.
The smallest drop in retail rents was downtown, in an area that is largely residential. Average asking rents on Broadway from Battery Park to Chambers Street fell 1% to $ 407 per square foot.
According to a separate analysis by the New York-based think tank Center for a Urban FutureSome of the biggest closings in New York City last year came from chain stores like Duane Reade, Metro PCS, Modells Sportartikel, Papyrus, GNC and Mattress Firm. The number of chain stores in the city fell by 13.3% to 6,891 in 2020. Several of these companies Filed for bankruptcy, and part completely liquidated.
And while it will likely take some time for landlords to fill those empty storefronts or properly re-zone them for new uses, experts say this could be an ideal time for businesses still in growth mode to move in right away. targetFor example, it signed a number of leases in Manhattan last year, including one for a new store in SoHo.
“While declining rents are an ongoing sign of the challenges the industry is facing, the current environment also provides opportunities for new retailers to enter the Manhattan market or existing tenants to secure low rates and get flexible leases,” said Whelan from REBNY.
In particular, rents, which are the actual rents at which rental contracts are signed, are even lower than asking rents, REBNY said. Brokers indicate an average difference of 20% between asking rents and rental income.