Manhattan retail rents drop amid rising unemployment

NEW YORK: Store rents in Manhattan fell in the third quarter in seven of 10 districts as unemployment and the recession cut spending.

Fifth Avenue from 42nd to 49th streets in Midtown was the hardest hit with rents falling 30% from the second quarter to US$441 (RM1,512) per sq ft, broker CB Richard Ellis Group Inc the broker said on Nov 4 in a statement. Retail rents on Fifth Avenue from 49th Street to Central Park, among the world’s most expensive shopping areas, fell 4.1% to US$1,643 psf.

US shopping centre vacancies hit a 17-year high in the third quarter as unemployment and cutbacks in consumer spending forced store closings, Reis Inc, a New York-based real estate research company said on Oct 8. Rents fell to their lowest since the first quarter of 2007.

“We are seeing big-box discounters like T J Maxx and Kohl’s actively seeking space, because they have been drawn back by the unusually affordable rents,” Alison Lewis, senior managing director of CBRE Retail, said in the statement. “Landlords are being more flexible in offering short-term deals.”

Fashion designers and such retailers as Target Corp and Toys “R” Us Inc are considering taking advantage of low prices by opening “pop-up” stores -- temporary shops where they can test new markets and selling concepts for the holiday season, Lewis said.

The decline in rents was smaller in the third quarter than it was in the first half, the report said, calling it a sign that “rents in several neighborhoods appeared to be stabilising”.

Lower rents on Madison Avenue above 57th Street, where 28 stores amid a stretch of luxury and fashion boutiques were available in July, sparked a “flurry” of new leases, including Baby CZ, Brunello Cucinelli, Du Mont Jewelry and Raymond Weil, according to the report.

Rents also fell on the Upper East Side on Third Avenue between East 60th and 72nd streets, declining 18% to about US$237 psf. On Broadway on the Upper West Side between West 72nd and 86th streets, rents fell almost 11% to US$264 psf.

The biggest rent increase was downtown on Broadway between Battery Park and Chambers Street, where rents climbed almost 11% to US$234 psf. Times Square rents rose 8.3% to US$800 psf, while rents in Soho rose less than 1% to US$483 psf, according to the report.

The two biggest retail leases of the quarter were both along Union Square South at 14th Street, where Best Buy Co. rented 46,000 sq ft and Nordstrom Inc. took 32,136 sq ft, CB Richard Ellis Group said. – Bloomberg LP

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