Tourist-magnet Soho corridor sees 37% decrease in retail rents

Real Estate

Commercial rents fell across Manhattan retail corridors in the past year, with one Soho stretch down a whopping 37 percent.

That’s according to the Real Estate Board of New York’s spring 2021 retail market report, which covers March through May, previewed by The Post.

The retail rental market’s recovery depends on Manhattan office workers returning to their desks, the report said.

“Signs of a nascent recovery are tempered by the reality that traffic in most retail corridors is far from approaching pre-pandemic levels,” it noted. “Sustained momentum requires an accelerated return of employees to the office, the resurgence of tourists and the opening of cultural and entertainment venues. Over the next six months, we should see these drivers of retail growth improve.”

Retail space in tourist and commuter neighborhoods took the biggest hits according to the report.

“There were really no tourists to speak of. And in the business areas, it was a ghost town,” Robin Abrams, vice chairman at Compass Inc., told The Post. She described the market as “extremely challenged.”

For instance, in tourist-magnet Soho, asking rents on Broadway between Houston and Broome streets fell 37% since last spring, to $310 per square foot.

Asking rents in that strip are also down a dramatic 43 percent from pre-pandemic spring 2019, REBNY data showed.

Midtown also saw sizable declines.

In Times Square, asking rents on Broadway and 7th Avenue, between 42nd and 47th streets, fell 26 percent to $1,480 per square foot. On East 57th Street, between 5th and Park avenues, they fell 22 percent to $531 per square foot.

Tourists walking in Times Square where commercial rent has fallen by as much as 26 percent in some parts.
Tourists walking in Times Square where commercial rent has fallen by as much as 26 percent in some parts.

The report did not examine vacancy rates, which soared in some of these areas as tourists dropped off and workers logged in remotely.

Commercial rents in more residential neighborhoods were more resilient, Abrams said, as home-bound New Yorkers made a point to frequent local businesses.

For example, rents on Broadway between 72nd and 86th streets, on the Upper West Side, were flat year over year at $240 per square foot. On the Upper East Side, on East 86th Street between Lexington and Second avenues, asking rents declined a modest 8 percent, to $311 per square foot.

Abrams said the cheaper commercial market has provided an opening for local businesses to “trade up” for the same price, or rent a similar space for less, as international and national businesses paused expansion.

Personal services, like salons or barbers, and home-goods stores did well, while restaurants suffered through the pandemic, she said. Today, she sees “huge demand” for space from health and wellness-type businesses, such as gyms or spas, including those that offer injectables, such as Botox or fillers.

The cheaper rents have also lately spurred leasing activity for those vacant stores, the report said. “Even where landlords are not adjusting asking rents, they are offering more tenant improvement allowances, free rent, percentage clauses as well as flexibility on renewal and term clauses.”

Abrams said market conditions have also allowed more “creative and flexible deal-marking.” For instance, instead of the “traditional” 10-year commercial lease, she’s seen tenants lease space for one year, with a long-term option — or a three-year lease, with an option to renew for seven years at “fair market value.”

REBNY said the report “expressed cautious optimism” for the city’s economy and real-estate market. “Conditions remain far from normal, but they are improving,” the report said.

“It’s amazing how quickly the cycle turns,” Abrams said.

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