Commercial real estate has been going through its own market correction due to numerous vacancies.
Reacting to the pullback from high rents by retailers themselves, the owners have miraculously self-corrected by dropping rents and cutting many deals.
Some 15 of 17 corridors have dropped asking rents over the last three years with three lowering rents more than 20 percent and 10 of them more than 30 percent, according to the Real Estate Board of New York Fall 2018 Retail Report.
“Lease terms are more flexible, owners are accepting more short-term deals, improvement allowances are more generous, and retailers are trying different concepts for the new retail market before they agree to a long-term deal,” the report states.
The most luxe area of Fifth Avenue between 49th and 57th streets saw average asking rents fall year-over-year by 24 percent, to $2,973, due to the size, shape and number of storefronts now available. Its high average was $3,683 in the spring of 2015.
Madison Avenue north of East 57th Street experienced its seventh consecutive year-over-year fall in average asking rents, to $1,160 per square foot — with some brokers whispering to me about taking rents in the $600-per-square-foot range. Its high of $1,709 per square foot was in the fall of 2014.
Overheated areas along West 14th Street in the Meatpacking District have had rents drop to $303 a square foot, and the previously hot blocks along Broadway in Soho saw rents fall to $508 per square foot as both corridors experienced the sixth year-over-year decline in average asking rents. In the spring of 2015, the Meatpacking average had been at $377 a square foot and Broadway had topped $977.
As Bleecker Street has gone from luxe to pop-up, rents have fallen 17 percent, to $293 per square foot, from $351 last fall. They were at $484 in the autumn of 2014.
The good news is that along 125th Street in Harlem, rents rose 14 percent, to $140 a square foot, up from $124 this past spring, although I’m sure the Harlem politicians will complain the higher rents will shut out local shopkeepers. Looking back, average rents were $141 per square foot in the spring of 2015.
And as brokers complain that the store size regulations instituted by the city along Broadway have made it more difficult to lease, rents between West 72nd and West 86th streets nevertheless rose by 5 percent since the fall 2017 price of $291 per square foot.
But the current rents on Broadway are 6 percent lower than spring’s $325 per square foot. REBNY explains that this is a result of the pricing on the space that was leased and on what is left.