Retail rents in New York keep dropping, opening up the door for a new wave of stores to move in.
Average rent prices in a dozen of 16 main retail corridors in New York fell in the past 12 months, according to a new report from CBRE. The average advertised rent fell by a little more than 12 percent to $658 per square foot and landlords are more willing to take less, the commercial real estate services firm found.
Property managers are lowering rents "in an effort to stimulate activity, while brokers report growing tenant interest," said Nicole LaRusso, a director of research and analysis at CBRE.
Following years of sky-high rents in the city after the Great Recession that forced many businesses to either halt expansion plans or shutter their shops altogether, commercial real estate owners are more willing to negotiate today — at least until vacancies are less rampant and dealmaking activity stabilizes. There's some evidence it may be working. Coffee Bean & Tea Leaf is mapping out plans to open 100 cafes in New York, while discount retailer Five Below plans to open its first store in Manhattan on Fifth Avenue.
The Plaza District of Midtown was the most active neighborhood for leasing activity in New York during the second quarter, CBRE found, with nearly 50,000 square feet of commercial space leased. The next most active area was Midtown West, followed by NoHo, the Upper East Side and Chelsea, the report said.
The most active types of tenants signing new leases were food and beverage shops, CBRE found. Almost 30 food and beverage deals were signed in New York's 16 main retail corridors during the latest quarter, according to the report. Next were apparel companies, followed by entertainment, department stores and sporting goods companies.
"This is an opportunistic time, and rents have definitely softened," Faith Hope Consolo, chairman of Douglas Elliman's retail group, told CNBC. "There's nothing like a New York location. ... One store [in Manhattan] can make as much as a dozen suburban locations."
Still, some storefronts have been sitting on the market for months.
Within the 16 New York corridors monitored by CBRE, 143 spaces have gone empty for at least a year. Fifty-eight percent of those locations have seen their asking rents drop, too.
According to Consolo, "there are more spaces available [in New York] today than we've seen in the past decade." But companies are starting to flood in, and there are great deals to be found, she said.
In the NoHo area in particular, a flood of younger e-commerce brands that mostly sell online have moved into the neighborhood to test out adding a brick-and-mortar location. Names like street retailer Kith and women's clothing brand Reformation have rented space there. Lululemon also has its test lab there.
"Across Manhattan there has been an uptick in interest as a growing number of tenants across sectors are shopping space in the market, and landlords are increasingly partnering with tenants on creative and flexible deal terms," LaRusso added.
Some of the top lease transactions in New York during the second quarter of 2018 included Feld Entertainment taking a 30,941-square-foot space in the Plaza District to open a "DreamWorks Trolls the Experience" in the fall, cycling studio Peleton taking a 30,319-square-foot space in Midtown West and Target taking a 21,000-square-foot space in Gramercy.