Retailers balking at elevated asking rents have finally sent them sliding back in Manhattan as building owners have decided to whip up interest with lower prices.
According to the new Real Estate Board of New York (REBNY) report, areas seeing declining retail rents include Times Square, Herald Square, the Flatiron and Meatpacking districts,meatpacking Soho, and even Harlem, where spaces on 125th Street can still be had from $65 to $279 per square foot.
The biggest bright spot now is the Financial District, where asking rents have jumped 20 percent on Broadway from Chambers Street to Battery Park. That is due to new projects, many feet on the street, and the completion of the World Trade Center and Fulton Street transportation hubs. Last fall’s average asking rent of $308 per square foot is now $369.
On the Upper West Side, the average rent on Columbus Avenue from 66th to 79st streets has risen 8 percent from $375 per square foot last fall to $403.
“Six months ago, the brokers were of mixed opinions,” said Mike Slattery, senior vice president of research for REBNY.
“They sensed the retail pricing was galloping ahead, and as the market softened a bit, the prices looked harder to achieve. There is no indication that tourism is slowing, but just that prices were too high.”
Retail broker Robin Abrams of the Lansco Corp. explained, “Nothing is new and nothing is alarming.” Rents are decreasing through “a natural correction,” she said, simply because they were too high before. “Tenants had pulled back, and with a challenging retail climate, tenants were worried about pulling the trigger.”
In the Flatiron’s Broadway corridor between 14th and 23rd streets, average asking rents of $390 per square foot are down 23 percent from last fall’s $510 and range from $350 to $430. REBNY blames that drop in the leasing of one high rent store.
Herald Square’s average of $836 per square foot is down 11 percent year-over-year to $445 per square foot, with a range of $391 to $1,000.
Times Square has dropped 9 percent from last fall’s $2,390 per square foot to $2,179 with a range of $2,000 to $3,000 per square foot for ground-floor rents.
A profusion of empty stores in Soho may start filling now that Nike is about to open its 55,000 square feet at 529 Broadway on Friday, but a protest over its size is scheduled on Thursday.
Rents have settled down on Broadway between Houston and Broome streets with average asking rents of $755 per square foot down 9 percent from $831 a year ago. Rents there range from $685 to $760 per square foot while side streets are lower.
“We are hoping some of the people that delayed signing deals will come back to the market now that they see the owners are open to offers,” said Brian Klimas, REBNYS’s vice president of research and chief economist.
On Fifth Avenue from 42nd to 49th streets, rents are up 5 percent from last fall but down 8 percent from the spring with a range of $1,000 to $1,500.
The city’s highest retail rents are on Fifth Avenue between 49th to 59th streets. They run from $2,700 to $4,450 per square foot with the average of $3,484. That is up 3 percent from a year ago when it was $3,397.
Bulgari, for instance, paid $5,500 per square foot just a year ago to keep its corner spot in the Crown Building.
But in a city used to demonstrations, parades and dignitaries, if the Secret Service decides to shut down areas around Trump Tower on Fifth Avenue or parts of 56th Street for the next four years, building owners, including the Trump Organization, may be forced to provide give backs in rent, or worse, let tenants out of leases.
Real estate sources tell me Gucci, with almost 50,000 square feet at the base of Trump Tower, is already getting propositioned by others with available storefronts. Since it signed in 2006, it still has years left on its lease.
