The coronavirus pandemic is pummeling the retail real estate market in New York City, with rents tumbling and not expected to turn around anytime soon, according to a new report from commercial real estate services firm CBRE.
Average retail asking rents in the city continued to fall during the first quarter, which started Jan. 1 and ended March 31, with the average of the New York City neighborhoods surveyed dropping 9% year over year to $714 per square foot, the report said. This marked the tenth consecutive quarter of declines. On a year-over-year basis, 13 of the 16 corridors tracked by CBRE, including the Upper East Side and Upper West Side, saw rent decreases.
Most notably, in Times Square, retail rents have dropped to levels not seen since 2011. Average rents dropped 15.7% from a year ago to $1,647 per square foot. Average rents are now below $1,800 per square foot for the first time since 2011, CBRE said.
A corridor in SoHo along Broadway saw the biggest drop in asking rents, of 30.1%, to $420 per square foot from $600 per square foot a year ago. CBRE said some of the most expensive listings in the area are being repriced down, hoping to lure buyers with a cheaper deal.
"It remains to be seen how quickly normal life will return to New York City after the crisis has passed and how long the Manhattan retail sector will take to recover from this dramatic economic decline," the CBRE report said.
"The retail sector will remain under duress until social distancing mandates are lifted and foot traffic is restored," it said.
Retailers including Patagonia, Nike and Apple started temporarily closing their doors nationwide in mid-March to try to help halt the spread of Covid-19. All of Macy's department stores, including its flagship in Herald Square, have been dark since March 19. This activity was factored into CBRE's first-quarter report, but the situation has not improved into April, the start of the second quarter. CBRE is forecasting the U.S. economy will begin to recover in the third quarter.
Gov. Andrew Cuomo on March 20 ordered nonessential businesses in New York state to keep 100% of their workforces at home. Starting on March 22, individuals in New York were ordered to practice social distancing of at least six feet, and to limit outdoor activities. Cuomo on Thursday extended stay-at-home orders through May 15. The U.S. has seen more than 639,600 cases of COVID-19 and at least 30,985 deaths during the pandemic, according to data collected by Johns Hopkins University.
Stores along Fifth Avenue, Madison Avenue and Times Square sit void of shoppers. Many storefronts have been boarded up or have notices pasted in windows telling customers the owners hope to be back up and running soon.
Related Companies CEO Jeff Blau said earlier in the week that he does not anticipate malls and other retail in the U.S. reopening until weeks after offices are back up and running. Related operates the Hudson Yards mall and The Shops at Columbus Circle in New York City.