According to the CBRE Q3 retail market report, Manhattan's retail market showed signs of improvement in the third quarter of 2021 as vaccine mandates and an increase in tourism sparked optimism in the market. Leasing velocity in Manhattan increased, rising for the first time since 2019 and reversing eight consecutive quarters of decline.
Labor Day Weekend saw more than a quarter million visitors pass through Times Square, the highest number since the beginning of the pandemic, according to the Times Square Alliance. In another boost to retail confidence, New York City introduced a Covid vaccination mandate to participate in indoor dining, fitness and other entertainment activities.
"The city's economic fundamentals continue to strengthen with further improvement expected as more people return to pre-Covid routines," said Nicole LaRusso, CBRE Senior Director of Research & Analysis. "Food and beverage had another very active quarter with 24 leases signed across 76,000 square feet, a vote of confidence in the city and its recovery."
Retail leasing velocity in Q3 2021 was 1.57 million sq. ft., rising roughly 4.4% from the prior quarter but still 45.5% below a year prior. Wegman's Food Market, Bathhouse and Pink Taco each signed new leases for their first Manhattan locations.
NoHo recorded the highest leasing velocity with over 89,000 sq. ft. in two deals. Flatiron/Union Square recorded the second highest velocity with over 52,000 sq. ft. closed across six transactions. The Upper East Side saw the highest-level number of deals closed in Q3 2021 with approximately 32,000 sq. ft. across 12 transactions.
With 24 leases signed across 76,000 sq. ft., food and beverage was the most active category. The number of direct, ground-floor availabilities in Q3 2021 decreased to 282 spaces from 290 in Q2. The average retail asking rent in Manhattan's prime 16 retail corridors dropped a modest 1.6% quarter-over-quarter to $605 per sq. ft.