According to CBRE’s Q3 2018 Manhattan retail market report, New York City retail rents continued to drop during the third quarter, but forecasters are optimistic for the impending holiday shopping season.
The average asking rent across Manhattan’s 16 main retail corridors dropped 8.4% year-over-year, falling to $802 per sq. ft. Leasing velocity softened during the third quarter, closing out with 484,000 sq. ft. of velocity across 75 transactions. Of those transactions, 25 were signed by tenants in the food and beverage industry and 18 were signed by tenants in the apparel industry. Jewelry retailers also accounted for close to 17% of total square footage leased in the quarter, with just over 80,000 sq. ft.
“The luxury and jewelry industries were very active during the third quarter,” said Andrew Goldberg, a vice chairman at CBRE. “Tiffany and Co., Balenciaga and Celine all signed deals during Q3, helping to bolster the sector’s leasing activity.”
During the third quarter, the Plaza District was once again the most active neighborhood in terms of leasing velocity, with nearly 100,000 sq. ft. leased. SoHo has the largest number of transactions signed during Q3, with 13 closed deals. Even with rents continuing to drop, forecasters are still predicting a robust 5-5.6% increase in sales during the holiday shopping season.
“The Manhattan retail market continues to search for the right level with respect to rent, as landlords show ongoing willingness to negotiate lease rates and terms in order to secure tenants,” said Nicole LaRusso, Director of Research & Analysis, CBRE Tri-State. “However, the positive local and national economic conditions and the prediction for a strong holiday shopping season ahead are creating great opportunities in New York. With more of the consumer spend going to e-commerce, success in the market will increasingly rely on retailers pivoting to an omnichannel approach, with close integration of e-commerce within the bricks-and-mortar retail store, and online brands seeking out space for in-real-life stores. Retailers who are innovative and nimble will continue to find that the New York market is a great place to do business.”
This year, holiday sales are expected to exceed $1.1 trillion nationally. Meanwhile, e-commerce sales during the holiday period are expected to increase by 17-22%, though from a much smaller base.