Retail Rents Surge, Real Estate Board Reports

Rental prices in prime retail locations across Manhattan surged to record highs over the past 12 months, according to a report released yesterday by the Real Estate Board of New York. Ground floor space on the 15 blocks between 57th and 72nd streets on Madison Avenue rose 35% and now commands an average of $902 a square foot, a record for the corridor and the city.Other hot spots include the prime shopping strip along Fifth Avenue between 49th and 59th streets, which surged to $844 a square foot, and the block between Fifth and Park avenues along 57th Street. Rents there were up 56.2% to $834 a square foot.“We’re in the midst of the most exciting retail market in the last decade,” the chairman of the retail leasing and sales division at Prudential Douglas Elliman in Manhattan, Faith Consolo, said. “From SoHo to Times Square to the meatpacking district to the Upper East Side, New York City is the most sought-after retail location in the world.”She says demand has been driven by strong consumer confidence, a rejuvenated, post-September 11, 2001, tourist market, and luxury retailers keen to establish and maintain a presence on key retail corridors.A senior vice president at Corcoran, Neal Sroka, said he agrees: “If you’re a status luxury store, and you’re not on Fifth or Madison, people ask why not. It’s more about the presence than anything. Retailers are looking at these storefronts as additional advertising.”He says the strength in the retail rental market also comes on the back of strength in the commercial market more generally. Having paid premium prices, investors need to charge higher rents to produce attractive returns. “They buy these properties with the understanding that the retail market is still there, that it can support these prices,” he said.The highest percentage increase occurred along the store fronts of 42nd Street between Sixth and Eighth avenues, up 85.9% to $290 a square foot. Overall, the average asking price per square foot for ground-floor rental space in the 14 major Manhattan corridors surveyed increased 18.8% over the period to $329.The president of the Rebny, Steven Spinola, contrasted current prices with those of just five years ago when the board first began the survey. “Asking rents on the major streets like 57th Street and Madison or Fifth avenues was considered high at $600 or $650 per square foot,” he said in a statement. He said that the “record surge” in asking rents was a product both of demand by retailers for the “most heavily trafficked areas of Manhattan,” as well as “the overall health of the retail market.”As for tomorrow’s hot spots, Mr. Sroka said demand for retail space on prime corridors will remain strong even in a slow economy, since most of the top tenants are proven retailers and big-name brands with deep pockets. Other growth areas to watch for, he said, include the far West Side, Harlem, the Lower East Side, and Long Island City.Ms. Consolo expects improvement downtown and around the financial district and predicts that rents there could double as construction accelerates. She also points to development on the Lower East Side and the far West Side between Chelsea and the Upper West Side as a catalyst for strong growth in retail rental prices going forward. That, and a store-crazy consumer public. “This is, after all, a city of shopaholics,” she said.

Retail Rents Surge, Real Estate Board Reports

Retail Rents Surge, Real Estate Board Reports

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