Rents for retail space in New York City have tumbled to historic lows, dropping as much as 25% from 2019 levels, as troubled retailers like Neiman Marcus and Century 21 closed stores and vacancies soared, according to a report Friday.
The Real Estate Board of New York's biannual report found that asking retail rents throughout Manhattan during the fall of 2020 declined in all of the 17 corridors it tracks, including pockets along the Upper East Side, the West Village and Downtown.
Taking rents, the actual rents that leases are signed at, are even lower than asking rents, REBNY said. Brokers are citing a 20% difference, on average, between asking rents and taking rents, it said.
Eight areas saw their lowest average asking rents in at least a decade, including SoHo, the upper part of Madison Avenue and upper Fifth Avenue. REBNY also found that 11 of the corridors have seen an increase in available retail space, ranging from 6% to as much as 67%, since 2019, reflecting a "substantial slowdown in Manhattan retail transaction volume" during the coronavirus pandemic.
"Historic declines in rent across Manhattan's most prominent retail corridors show just how much the market has adjusted amid the unprecedented impacts of the Covid-19 crisis," REBNY President James Whelan said.
In the most expensive retail district in New York City, along Fifth Avenue, from 49th to 59th streets, average asking rents declined 8% to $2,618 per square foot, REBNY found. This area is home to a number of high-end retailers including Saks Fifth Avenue, Cartier, Versace and Tiffany. More recently, it has seen several businesses leave because they can no longer afford the sky-high rent. The new figures represent a 32% drop from the corridor's peak rent in the spring of 2018, REBNY said.
Along Broadway in SoHo, from Houston to Broome streets, average asking rents suffered the biggest drop of all the corridors, falling 25% year over year, to $367 per square foot, REBNY found. That represented a 62% decline from the corridor's peak back in the spring of 2015.
The turmoil brought on by the health crisis has been particularly hard for SoHo, which has always been seen as one of the most influential shopping districts in the country. It's often the neighborhood where international brands will open their first U.S. stores or where online start-ups like the sneaker brand Allbirds and the luggage maker Away have looked first to expand offline.
Vacancies in SoHo skyrocketed to roughly 33% by the end of December, from about 19.5% at the start of 2020, according to Mark Dicus, executive director of the Soho Broadway Initiative business improvement district.
Thirty-two locations permanently shut in SoHo last year, he said, with about half of those closures taking place during the period when New York had ordered all nonessential businesses closed.
"Recovery is going to take years, not months," Dicus said. "SoHo is uniquely positioned to continue to be that authentic neighborhood and that authentic place to come and shop in New York, but it's going to take time for those investments to be made again."
On Bleecker Street from 7th Avenue to Hudson Street, average asking rents fell 9% to $252 per square foot, marking the lowest figure that REBNY has ever recorded for the area.
The smallest decline in retail rents was Downtown, in an area that is largely residential. Average asking rents on Broadway from Battery Park to Chambers Street fell 1% to $407 per square foot.
According to a separate analysis by the New York City-based think tank Center for an Urban Future, some of the biggest closures in New York City last year stemmed from chain stores including Duane Reade, Metro PCS, Modell's Sporting Goods, Papyrus, GNC and Mattress Firm. The number of chain stores in the city fell 13.3% in 2020 to 6,891, it said. Several of those companies filed for bankruptcy, and a portion liquidated entirely.
And while it likely will take some time for landlords to fill those empty storefronts, or to properly rezone them for new uses, experts say this could be an ideal time for businesses still in growth mode to move right in. Target, for example, signed several leases in Manhattan last year, including one for a new store in SoHo.
"While falling rents are an ongoing sign of the challenges facing the industry, the current environment also presents opportunities for new retailers to enter the Manhattan market or for existing tenants to lock in low rates and pursue flexible rent agreements," REBNY's Whelan said.