NYC retail leasing surges in Q4
Leasing velocity increases considerably in Q4 2021, driven by luxury and essential retailers
- Ebere Anokute
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Don’t call it a comeback…
…but it looks like New York City retail is coming back! The city won’t be fully back to normal until we see the full return of tourists and office workers, but there are many encouraging signs indicating that the city is trending in the right direction. As one of our most dense and most important cities, the trends that take off in New York City often eventually spread to other US cities, and even the world. Those of us who are watching the comeback of urban retail should be paying close attention to New York City as a bellwether of change.
Landlords reconsider pricing strategies as leasing activity picks up
Quarterly deal volume
Rents across all of New York City’s prime corridors dropped by 13.5% year-over-year on average, according to a new report from JLL Research. This accounts for the largest asking rent decrease in five years, and can be attributed to the sizable increase in deal volume that was also observed. Leasing velocity continues to trend upwards, increasing by 24.1% quarter-over-quarter in Q4. Essential businesses continue to drive leasing, accounting for 56.7% of new deals signed, a trend that has been observed since pre-COVID. Although total deal volume is still down 31.0% from the same period in 2019, Q4 also accounted for the highest quarterly deal count since Q1 2020 – A.K.A. the onset of the pandemic. We love to see it!
Luxury tenants continue to smell opportunity
While the spaces themselves might be going for cheaper than they were previously, what’s certainly NOT cheap are the tenants leasing up those spaces. Luxury retailers have seen massive gains throughout the pandemic, due to a fortuitous combination of their consumers’ financial stability, robust savings accounts, and pent-up demand.
The COVID recession was unique for many reasons, and one of the most important was the profile of jobs that were lost. Unlike previous recessions which saw the financial services industry hit particularly hard, this time around the bulk of jobs lost were in the hospitality sector. Meanwhile, those high-income, office-using individuals relished in their job security and patronized these luxury retailers, who in turn used these gains to expand their physical footprints, a trend we saw exemplified in NYC.
The most recent activity came from Kiton, a luxury menswear company that leased 3,500 square feet of space at 692 Madison Avenue in the heart of the Plaza District. Luxury watchmaker F.P. Journe also laid down roots in the fourth quarter, opting for the bustling side streets of SoHo, where they recently signed on for 6,210 square feet at 53 Mercer Street.
Surge in leasing not enough to move the needle on availability
Prime corridor average availability rate
Average availability continues to inch downward, coming in at 27.0% in Q4, down very slightly from 27.1% in Q3. Once again, the good news here is the way things are trending: the previous peak of 27.9% observed in Q2 2021 was the highest rate in the last ten years, so it’s evident that conditions are continuing to improve. There is a direct correlation between increased leasing activity and decreased availability, as retailers continue to capitalize on tenant-favorable market conditions to secure high-quality space for cheap.