According to CBRE's Retail Figures Q3 2023 report, Manhattan's retail market is a bright spot for real estate. The average asking rent in Manhattan's 16 prime retail corridors increased for the fifth consecutive quarter to $663 per sq. ft. - 2.7% higher than the previous quarter.
Additionally, the taking rent index in those same 16 markets was 80%, up 120 basis points (bps) from Q2 and 780 bps from the 72.2% recorded at the same time last year. The rolling four-quarter aggregate leasing velocity, which measures both renewals and new leases for the four prior quarters, was 2.8 million sq. ft., just 2.6% lower than that the previous period.
"The third quarter for the retail market can easily be characterized as a mixed bag," said Matthew Chmielecki, Senior Vice President of CBRE. "There is guarded optimism as demand for prime retail remains strong, but the supply constraint for top-tier locations is causing a slight slowdown in leasing."
According to CBRE's Q3 2023 report, retailing leasing showed a "top down" trend, with better locations in prime, highly trafficked areas garnering the most demand. As a result, supply is not matching demand for these higher end spaces, leading to a modest slowdown in leasing.
SoHo, one of the city's most active retail neighborhoods, recorded the highest leasing velocity among the 16 prime corridors in the third quarter with over 107,000 sq. ft. leased across 16 transactions, while Grand Central was the second-most active with a number of high-profile leases along the Fifth Avenue corridor, including Tommy Bahama's 18,000 sq. ft. renewal at 551 Fifth Avenue and California-based cannabis brand Harborside's first 5,700 sq. ft. dispensary at 587 Fifth Avenue. Also, athletic headwear brand Lids leased 5,200 sq. ft. at 535 Fifth Avenue.
Interestingly, apparel retailers took over the mantle from health clubs and food & beverage operators as the main driver of leasing activity in Manhattan, with over 156,000 sq. ft. leased across 19 transactions. The taking rent index, which measures how close taking rents are to asking rents in the prime 16 retail corridors, increased by 120 bps to 80% in Q3 2023 - a level not seen since 2019. Overall demand for top-tier locations remained strong, particularly in the popular SoHo and Flatiron/Union Square neighborhoods where the supply of prime spaces has been almost fully absorbed.