Bit by bit, ever so slowly, Manhattan retail is coming back, reports the Real Estate Board of New York’s Fall 2021 Manhattan Retail Report. The return of residents, tourists and, to a lesser extent, daytime office workers, combined with the most favorable rents and lease terms in a decade are boosting retail leasing.
“Retailers that previously steered clear of Manhattan are now signing leases. Many of these retailers that are new to the city have never experienced this level of traffic and demand, nor did they ever expect to be able to afford a location in Manhattan,” the report noted. Compared to the Fall of 2019, the number of ground-level storefronts with an asking rent of $200 per square foot or less has jumped by 132% from 19 to 44. On the other hand, the count of storefronts priced above $1,000 has fallen by 58% from 55 to 23.
Key market metrics — foot traffic, retail sales, tourism levels and hotel occupancy — remain below pre-pandemic levels but are heading to higher levels. The Times Square Alliance reported that an average of 227,180 people visited the district during October. This was the most since the pandemic, but still below the 377,318 visitors averaged in 2019.
Boosted by increased tourism, Manhattan retail sales have increased two consecutive quarters, rising by 1.4% to $36.9 billion in the second quarter, then by 3.8% to $38.3 billion in the third quarter, the report said.
In a sign of even greater faith in the market, tenants are now committing to more leases with lengthier commitments. But this comes at a price. While the sweetheart dealers of earlier in the year are gone, brokers noted that tenant improvement and lease flexibility are still prevalent. Compared to the fall 2019, there are twice as many spaces with an average rent under $300 per square foot. Times Square registered its lowest rent in more than a decade. Soho and Madison Avenue are seeing increased activity among international brands, and pop-ups are increasing the vitality of the districts. But large flagship stores in Times Square, Lower Manhattan and Fifth Avenue remain vacant.
Concerns remain, as new COVID-19 variants present risks to foot traffic, especially when the level of return of office workers in 2022 remains unknown and quality of life issues need to be addressed.
“Manhattan is better equipped to handle these dynamics than it was a year ago – and it is better equipped than many other major cities,” the report said. “The ability to handle COVID-19 and other public health crises, while keeping business open, has the potential to be another competitive advantage for the city. Never say never when it comes to the appeal of Manhattan attractions and the resilience of its residents.”
