Manhattan is developing around 2.4MM sqft in new retail space, which means: $374,400,000 in potential new gross rent revenue for the retail market alone.
Swatch and Victoria’s Secret take the biggest rents: reaching up to $35 Million in annual rent! Bulgari spends over $5,300 per square foot.
Retail prices as of Fall 2015 grew at a CAGR of 12.35% since Fall of 2012 but only grew 4.84% in the past 10 years (annually).
Retail leases are breaking records as average prices across Manhattan see double digit price movement from: 2014 to 2015. Bob Knakal, Chairman of Investment Sales at Cushman Wakefield, saw more blockbuster deals in 2014 than we did in 2015; however, the market was not shy about its price inflation.
The current price trend has been happening since 2012. Compound annual growth rates have been a whopping 12.35% since the Fall of 2012. If we look at this trend for the past 10-years, growth fall to 4.84% (the dotted trend-line below).
2015 saw the most notable deals in midtown Fifth Avenue. Bulgari holding onto the corner of 57th and 5th accepted rents at over $5000 per square foot, which overshadows most of the market. As for Swatch, they competed for the greatest annual estimated rental price, at $35 Million USD. A lease that will cost them almost $3 million USD per month with the building owner Vornado. Vornado also had the second largest deal this year with Vicotoria’s secret’s estimated $34 Million USD lease with more than 4x the space—showing how location can affect price.
However, there was some negative news. Madison Avenue between 57th-72nd corridor realized the most notable decrease in price per square foot. The average asking rent fell 6% from $1,700 psf in the Spring of 2015 to $1,613 in Fall 2015. The decrease was not due to overall weakness or less interest in the corridor; instead, it is due to the amount of supply available in the corridor and landlords becoming more realistic in setting an asking rent.
In a previous article, we wrote how 70% of new development was in Residential and 30% of new development was in Commercial in 2015, why doesn’t NYC build more commercial retail space? CoStar, a commercial real estate tool, helped us with the current numbers:
With 2.4MM Sq. Ft. in new retail space will be coming to market, Manhattan will see: $374,400,000 (million) in annual rental revenue, or $31,200,000 per month, as the average square foot in Manhattan reached $156! One has only to speculate how much more investors will make when we add office space, rentals and condominium sales.