Rebny Retail Report Spring09

Spring 2009

Stephen M. Ross, Chairperson Steven Spinola, President

570 Lexington Avenue / New York, NY 10022 / 212.532.3100 www.rebny.com

Spring 2 0 0 9

Ex ecutiv e Summary

M

anhattan average asking rents for all available space declined 11 percent from the Fall 2008 to $115. Each of the borough’s six geographic areas showed a decline in the average asking rent for all available space, ranging from 6 percent in Midtown to 22 percent on the West Side compared to six months earlier. Double digit declines in the average asking rent for all available space were reported on the East Side (12 percent), Midtown South (14 percent), Downtown and Upper Manhattan (13 percent). These declines in the average asking rent for all space are from market highs in the fall 2008. In most cases, the average rents for Manhattan and the borough’s six geographic areas are comparable to asking rents from a year ago. Since September 2008, the turmoil in the financial markets has reverberated through the real estate industry and the retail market. Despite this uncertainty, our Advisory Group reports that leasing activity is occurring throughout Manhattan. More interestingly, new retail tenants are looking at store space in New York for the first time. No doubt declining prices are attracting tenants for whom the city is becoming more affordable. The average asking rent for ground floor space in many of the major retail corridors highlighted in the report likewise showed declines compared to Fall 2008. Madison Avenue declined 14 percent, Broadway on the Upper West Side declined 5 percent and Fifth Avenue in the 50s fell 3 percent from Fall 2008. In a few corridors, such as Fifth Avenue in the Flatiron District and Broadway in SoHo, the average asking rent for ground floor space showed a modest gain. Our Advisory Group noted that in this economy owners are uncertain about what is an appropriate asking rent. Hence, they do not modify the asking rent which could have been set as much as a year ago. Instead, they would offer a longer free rent period and a more generous build out allowance. These economic incentives vary from owner to owner.

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A few years ago, in our meeting to review our report, our Advisory Group began to express concern about the steep rise in asking rents. They believed that asking rent increases in the major retail corridors in Manhattan were outpacing overall economic growth and questioned the sustainability of these asking rent increases. Accordingly, they see the recent decline in asking rents as an anticipated market correction in a market that was experiencing unsustainable rent growth. In our tumultuous economy it is crucial to examine all the asking rent information—average, median and range of ground floor space— in assessing the market conditions of an individual major retail corridor and evaluating asking rents for individual stores. An emerging issue identified by our Advisory Group is the rise in sublet space. In earlier reports, this sublet space was virtually indistinguishable from space marketed directly by the landlord and was included in our reports. Going forward, our Advisory will be examining the asking rents for sublet space listings. Those listings that reflect market conditions (comparable rent with a term of 7 years or more) in a particular location will be included. In situations where there are sublet listings with shorter lease terms we will attempt to determine if these subleases are likely to be converted to long-term leases with the participation of the building owner. Those listings, however, in which the asking price reflects economic distress of the tenant and significantly lower than other available space in the market will be omitted. The goal of our report is to provide complete, comprehensive information—the major neighborhoods and prime corridors in Manhattan—on the retail market. With the invaluable assistance of our Advisory Group, we have attempted to alert the readers of our report to factors that are not captured by the rent data. This information is critical to understanding the market. We hope in these challenging times you find our report informative and useful.

Spring 2 0 0 9

AVERAGE ASKIN G RENT : SELECTED MAJOR RETAIL C ORRIDORS Available Gr ound Floor Space Only Spring

Fall

Spring

2009

2008

2008

% Change

% Change

From Fall From Spring 2008

2008

EASTSIDE Madison Ave: 57 - 72 St

$979

$1,143

$1,066

-14%

-8%

Third Ave: 60 - 72 St

$275

$287

$329

-4%

-16%

East 86 St: Lexington Ave - 2nd Ave

$400

$475

$450

-16%

-11%

Broadway: 72 - 86 St

$293

$309

$384

-5%

-24%

Columbus Ave: 66 - 79 St

$257

$300

$268

-14%

$900

$600

n/a

50%

n/a

WESTSIDE

MIDTOWN MIDTOWN East 57 St: 5 Ave - Park Ave Fifth Ave: 42 - 49 St

$615

$550

$704

12%

-13%

Fifth Ave: 49 - 59 St

$1,631

$1,675

$1,958

-3%

-17%

Broadway & 7 Ave: 42 - 47 St

$1,381

$775

$809

78%

71%

$285

$276

$401

3%

-29%

$508

$643

$656

-21%

-23%

$417

$304

$462

37%

-10%

$251

$251

$198

0%

27%

$452

$432

$424

5%

7%

$528

$362

$397

n/a

33%

$119

$125

$107

-5%

11%

MIDTOWN MIDTOWN SOUTH Flatiron Fifth Ave: 14 - 23 St Herald Square West 34 St: 5 - 7 Ave Meatpacking 14 St: 9 - 10 Ave DOWNTOWN DOWNTOWN Financial District Broadway: Battery Park - Chambers St SoHo Broadway: Houston - Broome St West Village Bleeker St: 7 Ave South - Hudson St UPPER MANHATT AN MANHATTAN Harlem 125th St. (River to River)

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Spring 2 0 0 9

MEDIAN ASKIN G RENT : SELECTED MAJOR RETAIL C ORRIDORS Available Gr ound Floor Space Only Spring

Fall

Spring

2009

2008

2008

% Change

% Change

From Fall From Spring 2008

2008

EASTSIDE Madison Ave: 57 - 72 St

$1,000

$1,140

$1,121

-12%

-11%

Third Ave: 60 - 72 St

$250

$300

$342

-17%

-27%

East 86 St: Lexington Ave - 2nd Ave

$400

$450

$450

-11%

-11%

Broadway: 72 - 86 St

$300

$316

$325

-5%

-8%

Columbus Ave: 66 - 79 St

$271

$300

$288

-10%

-6%

$600

$600

n/a

0%

n/a

WESTSIDE

MIDTOWN MIDTOWN East 57 St: 5 Ave - Park Ave Fifth Ave: 42 - 49 St

$506

$550

$455

-8%

11%

Fifth Ave: 49 - 59 St

$1,561

$1,500

$1,958

4%

-20%

Broadway & 7 Ave: 42 - 47 St

$1,450

$775

$809

87%

79%

$250

$271

$400

-8%

-38%

$500

$640

$672

-22%

-26%

$400

$300

$467

33%

-14%

$200

$200

$225

0%

-11%

$480

$400

$421

20%

14%

$525

$304

$332

73%

n/a

$100

$115

$92

-13%

9%

MIDTOWN MIDTOWN SOUTH Flatiron Fifth Ave: 14 - 23 St Herald Square West 34 St: 5 - 7 Ave Meatpacking 14 St: 9 - 10 Ave DOWNTOWN DOWNTOWN Financial District Broadway: Battery Park - Chambers St SoHo Broadway: Houston - Broome St West Village Bleeker St: 7 Ave South - Hudson St UPPER MANHATT AN MANHATTAN Harlem 125th St. (River to River)

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Spring 2 0 0 9

ASKIN G RENT RAN GE: SELECTED MAJOR RETAIL C ORRIDORS Available Gr ound Floor Space Only Spring 2009

Fall 2008

Spring 2008

EASTSIDE Madison Ave: 57 - 72 St

$700 - $1,200

Third Ave: 60 - 72 St

$200 - $400

East 86 St: Lexington Ave - 2nd Ave

$400 - $400

$704 - $1,667

$600 - $1,538

$184 - $503

$300 - $350

$325

- $781

$400 - $500

$168 - $450

$325 - $620

WESTSIDE Broadway: 72 - 86 St

$236 - $325

Columbus Ave: 66 - 79 St

$162 - $325

$131

- $447

$150 - $348

East 57 St: 5 Ave - Park Ave

$600 - $1,500

$400

- $800

$0 - $0

Fifth Ave: 42 - 49 St

$432 - $1,333

$300

- $800

MIDTOWN MIDTOWN

Fifth Ave: 49 - 59 St Broadway & 7 Ave: 42 - 47 St

$1,200 - $2,200 $1,200 - $2,500

$325 - $1,333 $1,915 - $2,000

$622 - $2,000

$550 - $1,000

$618 - $1,000

$200 - $400

$238 - $325

$300 - $556

$475 - $550

$500 - $791

$450 - $830

MIDTOWN MIDTOWN SOUTH Flatiron Fifth Ave: 14 - 23 St Herald Square West 34 St: 5 - 7 Ave Meatpacking 14 St: 9 - 10 Ave

$400 - $450

$250

- $400

$320 - $600

$100 - $400

$100 - $500

$75 - $400

$333 - $550

$220 - $800

$275 - $600

$393 - $667

$130 - $800

$265 - $600

$75 - $200

$80 - $222

$40 - $220

DOWNTOWN DOWNTOWN Financial District Broadway: Battery Park - Chambers St SoHo Broadway: Houston - Broome St West Village Bleeker St: 7 Ave South - Hudson St UPPER MANHATT AN MANHATTAN Harlem 125th St. (River to River)

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Spring 2 0 0 9

ASKIN G RENT : MAJOR RETAIL NEIGHB ORHOODS All Available Space (Ground (Ground floor floor,, low low er Le v el, Upper Upper le v el, mezzanine) Spring

Fall

Spring

% Change

% Change

2009

2008

2008

From Fall

From Spring

2008

2008

MANHATT AN MANHATTAN

$115

$129

$111

-11%

4%

EASTSIDE

$168

$190

$164

-12%

2%

$116

$147

$123

-22%

-6%

$152

$161

$145

-6%

5%

$96

$111

$96

-14%

0%

$95

$110

$103

-13%

-8%

$52

$60

$60

-13%

-13%

60th Street to 96th Street, Fifth Avenue to the East River

WESTSIDE 60th Street to 116th Street, West of Morningside Park

MIDTOWN MIDTOWN 35th Street to 59th Street

MIDTOWN MIDTOWN SOUTH 15th Street to 34th Street

DOWNTOWN DOWNTOWN South of 14th Street

UPPER MANHATT AN MANHATTAN 97th Street and higher, Fifth Avenue to the East River; 116th Street and higher, West of Morningside Park

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Spring 2 0 0 9

SELECTED MARKET DATA Manhattan Retail Square Feet by Area N. Manhattan 10.3 8.8%

9.4%

Downtown 21.2

(millions of square feet)

East Side 9.6 West Side 4.4 4.0%

19.3% 26.2%

Midtown 28.8

32.2%

Midtown South 35.4

New York City Employment

(in thousands)

3,850 3,800

3,790

3,750 3,700 3,650

3,619 3,580

3,600 3,539

3,550 3,500

3,490

3,499

2010

2011

3,450 3,400 3,350 3,300 2008

2009

2012

2013

New York City CPI (1982-1984=100) 255 250.1

250 244.3

CPI

245 240

238.9 235.8

235.1

2008

2009

235

R

230 225 220 2010

2011

6

2012

2013

Spring 2 0 0 8

SELECTED MARKET DATA New York City Real Gross City Product (billions)

$500.0 $486.2

$480.0 $457.7

$460.0

$447.6

$440.0

$433.0

$427.8 $419.8

$420.0 $400.0 $380.0 2008

2009

2010

2011

2012

2013

New York City Gross Personal Income

$480.0 $456.6

$460.0 $437.1

$440.0 $420.0

$420.8

$419.4 $406.1

$406.1

2009

2010

$400.0 $380.0 2008

2011

Personal Income (In Thousands)

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2012

2013

$120

$100

$80

$109

$110

$112

8

$137 $128

$156

$161

S-2009

$164

S-2009

$178

F-2008

$200

F-2008

$122

S-2008

S-2009

F-2008

S-2008

F-2007

118

S-2009

Midtown F-2007

$170

S-2008

$136

F-2007

S-2007

Manhattan

F-2008

$138

107

F-2006

102 106

S-2008

$132

S-2007

$161

S-2007

$123

F-2006

S-2006

F-2005

120

F-2007

$129

S-2006

$160

F-2006

$127

S-2006

$111

F-2005

$186

S-2007

$121

$125

S-2005

108

F-2006

$140

S-2005

Eastside

S-2006

$122

F-2004

80

S-2004

103

F-2005

$104 $107

F-2004

$155

S-2005

$100

F-2003

88 97

F-2005

$91

S-2003 92 97

S-2005

Westside

F-2004

$120

S-2004

$143

F-2004

$100

$80 $111

F-2003

$160

S-2004

$103 $113

S-2003

$138

F-2003

$103

F-2002 85

S-2003

$120

F-2002

S-2002 87

F-2002

$180

S-2002

F-2001

98

S-2004

$80 $92

S-2002

F-2001

S-2001

F-2000

84

F-2003

$107

S-2003

$115

F-2002

$160

S-2002

$92

F-2001

$140

F-2001

$100

S-2001

$133

S-2001

F-2000

$140 96

S-2001

F-2000

100

F-2000

Spring 2 0 0 9

Average Retail Asking Rents PSF 140 129

111 115

$190

$155 $168

$148

$128

$160

$135 $147

$123

$107 $116

$145

$152

$128

$133

$48

9

$50

$80

$60 $95

$50

S-2009

F-2008

$92

S-2008

$98

F-2007

Downtown

S-2007

F-2006

S-2006

F-2006

S-2009

F-2008

S-2008

F-2007

S-2007

S-2006

$73 $85 $96

S-2009

$47

F-2005

Midtown South

F-2008

$50

S-2005

$94

S-2008

$51

F-2004

S-2004

$100

F-2007

$50 $82 $85

S-2007

$53

F-2005

$90

S-2005

$90

F-2006

S-2004

F-2003

$90

S-2006

$59

F-2004

$58 $78

F-2005

$50 $75

S-2005

$53 $74

F-2004

$58

F-2003

S-2003

$78

S-2004

$59

S-2003

$60 $70

F-2002

S-2002

$70 $71

F-2003

$51 $58

F-2002

$60

S-2002

$74

S-2003

$70

F-2001

$70

F-2002

$50 $60

F-2001

$110

S-2002

$50

S-2001

$80

S-2001

F-2000

$79

F-2001

F-2000

$110

S-2001

$70

F-2000

Spring 2 0 0 9

Average Retail Asking Rents PSF $120

$111

$89 $96

$110 $103 $95

$73 $82 $85

$67

$76

Upper Manhattan

$56

$60 $60

$47

$52

$43

$40

Spring 2 0 0 9

acknowledgements The REBNY Retail Report Advisory Group includes:

Robin Abrams, The Lansco Corporation J Karen Bellantoni, Robert K. Futterman & Associates, LLC J Benjamin Fox, Winick Realty Group J Andrew Goldberg, CBRE J David Green, Cushman & Wakefield J Joanne Podell, Cushman & Wakefield J Fred Posniak, W&M Properties of New York, LLC J Jeffrey Roseman, Newmark Knight Frank J Alan Victor, The Lansco Corporation

T

he Retail Report provides objective, comprehensive information about asking rents and market trends in Manhattan. Issued twice a year—Spring and Fall—the report is a project of the REBNY Retail Committee. The report presents retail space information by geographical area and focuses on the asking rent of the ground floor space on the major retail streets.

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