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During 2021’s second quarter, restaurant chains signed 23 new leases in Manhattan, taking 83,333 square feet of space, much of which already included a kitchen area and equipment abandoned when eateries shut during last year’s crisis, the Washington Post reported.
In the same period, clothing retailers inked 10 leases covering 49,236 square feet; health care businesses and jewelers signed two new leases each.
Even with those new deals, the number of available street-level storefronts on the island grew from 275 to 290 during 2021’s second three-month span, according to real estate services firm CBRE, a record for open spots.
Asking rents for the quarter averaged $615 per square foot, down 10.7 percent from a year before, the 15th consecutive quarter in which rents slumped, CBRE said, reaching their lowest levels in almost ten years. (See “Rock-Bottom Rents May Revive NYC Business Economy,” Trends Journal, 30 March 2021.)
In the trendy Soho area, rents plunged 22.9 percent to $487 a foot over the past 12 months, the steepest slide among Manhattan’s 16 districts. Rents in Times Square, devastated by a year without tourists, sank 22.5 percent to $1,277 per square foot, a depth not seen since 2001, according to CBRE.
In the commuter district around Grand Central Station, rates fell 10.4 percent to $675.
To lure tenants, landlords are offering enticements including rent-free months added to leases, improvement allowances, and setting rents as a percentage of sales.
“Manhattan is comprised of three things: the people who live here, tourists, and the office population coming in from the suburbs,” Jason Pruger, a managing director at real estate firm Newmark, said to CNBC.
“In order for Manhattan to be Manhattan, all three have to click,” he said.
TREND FORECAST: Pruger’s first two elements might fall into place, but the third—the return of more than a million commuters every day—will not. Working from home is the new normal.
As we have reported, JPMorgan Chase and other Manhattan corporations have ordered workers back downtown starting this fall. However, even if COVID’s Delta variant fails to shut offices again, not enough workers will return to central headquarters to revive New York’s commuter economy.
As we have predicted (“Remote Work = Commercial Bust,” Trends Journal, 2 June 2020), workers will stay home and downtown stores and restaurants will lose their traditional customer base.
At the same time, owners of commercial real estate will face a reckoning as they slash rents to lure a shrinking base of tenants, forcing them to demand property tax concessions from cities that will struggle even more to maintain police, fire, and public works infrastructures (“Office Workers’ Slow Return Endangers Landlords, City Finances,” Trends Journal, 9 March 2021).