Manhattan Asking Rents for Retail Space Down 11%
As the global recession continues to affect the retail industry, average asking rents for retail space in Manhattan had the first meaningful decline since 9/11, dropping 11 percent since fall 2008 to $115 per square foot, according to the Real Estate Board of New York (REBNY) Spring Retail Report.
While retail rents throughout Manhattan declined in the last six months, REBNY’s Retail Advisory Group, made up of the city’s leading retail brokers, said that this is a needed correction of the market’s rapid upward spiral, that tenants are still signing new leases, and that the decline presents opportunities for a new mix of retailers to enter the market. Rents surged 54 percent from fall 2001 to fall 2008, with average asking rents jumping from $84 per square foot to $129 per square foot, according to REBNY.
“Declines in asking rents have just begun to be reported although the retail market has been feeling the effects of the recession for some time,” said REBNY president Steven Spinola. “Our retail advisory group says that asking rents are now showing the impact of the global financial crisis. Further, they report that leasing activity is occurring throughout Manhattan and the declining prices are attracting tenants who were previously priced out of the market.”
REBNY’s advisory committee attributes the declines to a combination of factors, including the unsustainable rise in asking rents in the major retail corridors in Manhattan in the last several years, which was outpacing overall economic growth. In addition, asking rents do not reflect incentives that some building owners may be offering, such as a longer free rent period or a more generous build-out allowance, rather than lowering the asking rent.
Manhattan’s primary retail corridors saw declines in asking rents for ground floor space compared to fall 2008 to as much as $257 per square foot.
However, overall midtown Manhattan asking rents increased 5 percent compared to last year to $152 per square foot, while East Side asking rents increased 2 percent to $168. The advisory group says the increases reflect the inclusion of some data submitted by owners with asking rents established more than a year ago and uncertain of how to revalue space in today’s market, and owners who are offering incentives instead of lowering the rent.