Manhattan Retail Rents Fall as Tenants Grab Discounted Space

(Bloomberg) -- Manhattan’s retail rents fell by the most in five years, with the biggest decline in tourist-heavy Times Square. 

Average asking rents slid 14% in the fourth quarter from a year earlier across the borough’s prime shopping districts, according to a report by Jones Lang LaSalle Inc. Times Square rents tumbled 37% as landlords repriced spaces to attract tenants, the brokerage firm said. 

Retailers are taking advantage of the discounts. The number of new leases rose 24% from the previous quarter. That helped push the share of available space down to 27% from a record high of 28% reached last year. 

“Decreased availability correlates directly with the surge in leasing activity, as retailers continue to capitalize on market conditions to secure high-quality spaces at a discount,” JLL said in the report. 

As incentives, landlords offered new leases with as much as 12 months of free rent, and tenant improvements to spaces.

Manhattan’s retail market has been hammered by the pandemic, with foot traffic plummeting across all major shopping areas. Stores’ sales have increased in the past two quarters with more people returning to live in the city, workers going back to offices and tourism on the upswing. But uncertainty around new Covid-19 variants may suppress further gains. 

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