Manhattan’s Retail Market Makes Strong Recovery in 2023

Overall Availability Rate is Lowest in Nearly a Decade, SoHo’s Availability Rate is Lowest since Q3 2013, Madison Avenue Experiences Highest Average Asking Rent since Pre-Pandemic, Sales Activity Increases 16.7%

New York, NY – Cushman & Wakefield, a leading global real estate services firm, today released its fourth quarter 2023 retail statistics for New York, showing the market’s strong recovery as the year closed with the lowest overall retail availability rate in nearly a decade.

“New York City’s retail market has demonstrated resilience and adaptability, as the city remains a desirable location for retailers, continuing to attract a diverse range of businesses and offering customers an unparalleled shopping experience,” said Barrie Scardina, President of Americas Retail Services. “2023 was the year of retail resurgence for both leasing and sales activity as Manhattan’s submarkets have started to make a full recovery from hardships experienced during the pandemic. While we can expect fundamentals to continue to fluctuate over the coming quarters as the economy shifts, the retail market is well-positioned for success and our confidence in New York City remains strong.”

At the close of 2023, Manhattan’s retail availability rate was 15.1%, the lowest it’s been in nearly a decade, just 3% shy of Q4 2014 availability when the market was at its peak.

Demand for premier locations remained robust throughout 2023, with SoHo and Flatiron/Union Square experiencing a surge in demand due to their limited supply of prime spaces. SoHo continued to shine as the most desired retail submarket in Manhattan with 95 new leases and renewals signed in 2023, the most of any Manhattan submarket. This strong leasing velocity has contributed to the lowest availability rate in SoHo in a decade, measuring at 11.3%, the lowest since Q3 2013. This increased demand was reflected in the asking rents, which averaged $333 per square foot (psf) in the fourth quarter, marking a substantial year-over-year increase of 12.1%.

The Flatiron/Union Square submarket also experienced a decline in retail availability, reaching its lowest since Q1 2019 at 11.4%. The submarket had one of the largest annual decreases in availability, down 6.9% year-over-year. This heightened demand drove the average asking rent up to $355 psf at the end of the fourth quarter, a significant increase of 26.8% from Q4 2021.

Additionally, Madison Avenue saw a significant drop in availability, closing out 2023 at 16.4%, the lowest since Q1 2016. This tightening of available space has led to consistent increases in asking rents, resulting in the highest average asking rent Madison Avenue has seen since pre-pandemic, averaging $837 psf in the fourth quarter, a 13.9% increase from Q4 2021 when rents hit their lowest. After experiencing record leasing velocity in 2022, 52 additional leases were signed in 2023, with many new stores expected to open in early 2024.

Despite struggling with high rents and availability in 2019, Fifth Avenue experienced a resurgence in leasing in the second half of 2023 and is expected to continue this momentum into 2024. At year-end, availability along Lower Fifth Avenue (42nd to 49th streets) was 20.4%, a decrease of 12.9% compared to 2022. The luxury corridor along Upper Fifth Avenue (49th to 60th streets) ended the year at 18.8% availability, an 8.7% decline from five years prior. This positive trend was mirrored in the asking rents, which rose by 4.6% quarter-over-quarter and 3.2% year-over-year at $2,426 psf.

In addition to the resurgence of retail leasing, sales of quality assets are making a return as leasing fundamentals bolster investors’ confidence in the market. In the second half of 2023, seven retail properties in Manhattan traded at above $3,000 psf, the highest half-year total since 2017 and approaching the 2014-2016 peak years’ average of nine such transactions per half year.

Two important deals from the second half of 2023 include sizeable owner-user acquisitions, with Prada’s recent purchase of two retail/office properties at 720 and 724 Fifth Avenue for $835 million, which includes their flagship location, and Dyson’s purchase of several retail co-op units, majority-occupied by Versace, for $135 million.

The overall retail sector was the only Manhattan property type to avoid a significant year-over-year slowdown of sales momentum in 2023. Dollar volume remained level with 2022, while the number of properties sold increased by 16.7%.