Rents for New York retail space haven’t caught up to pre-pandemic highs
Rents for New York retail space haven’t caught up to pre-pandemic highs
Rents for retail space in Manhattan were, on average, still 20% to 30% below pre-pandemic levels in the back half of 2023, according to a new report from the Real Estate Board of New York.
This is partly because tourism is still down and fewer office workers are coming in every day. Even so, demand for retail space is strong.
Retail rents being down by as much as 30% doesn’t sound like a good sign. But Keith DeCoster, director of market data and policy at the Real Estate Board, said retail is rebounding. Certain parts of the city are doing better than others.
“Some of the retail corridors like Fifth Avenue and Times Square have a little bit more vacancy than they did,” he said.
Same with other parts of the city that have a lot of office buildings. But in neighborhoods with a good mix of residential, office, tourism and retail?
“We’re really busy,” DeCoster said.
Steven Soutendijk, leasing broker and executive managing director with the retail group at Cushman & Wakefield, said they’re seeing all kinds of businesses sign leases: luxury brands, coffee shops, clothing stores, restaurants.
And according to their data, availability rates are down to their lowest levels since 2014, he said. Then why are retail rents still so much lower than before?
Soutendijk thinks one reason is that landlords saw how their tenants’ businesses struggled in the pandemic and they’re worried about raising rents too high, too fast.
“And the second is that money is not as cheap as it was, so I think interest rates have actually dampened a little bit the rent growth,” he said.
There are also other factors that have nothing to do with the pandemic.
Chris Mayer, a professor of real estate at Columbia Business School, said that even before, people were shopping a lot more online and less in stores.
“Frankly, the peak of the retail market in New York was three or four years before COVID. So we were already seeing decreases in rents and leasing activity prior to COVID,” he said.
It’s possible the retail market might be about where it is today even if the pandemic had never happened, he said.
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