IRR-New York Mid-Year Viewpoint 2015 Local Market Report - Retail
For the purposes of maintaining consistency with other IRR surveys around the country, our reported rates and returns for New York City retail apply to more traditional community and neighborhood centers which would be found in the outer boroughs. However, mention Manhattan retail and urban street retail comes to mind. This segment has become its own investment class as retail condominiums have been created from mixed-use buildings. Seen as safe coupon clippers, investors love long-term leases that provide steady and predictable returns.
Cap rates have been driven down to the 4% range for well-located and leased properties. Rent levels have dramatically increased since the last recession. To demonstrate the market's resilience, even during the recession the vacancy rate did not hit 5%, which compares to a current level of 2%. Demand has been driven by robust numbers of tourist visitors which set a record in 2014 exceeding 55 million. Rent levels have responded to this demand showing strong increases in most neighborhoods.
The highest average rent remains the Fifth Avenue corridor between 49th and 59th Streets, which comes in at a whopping $3,500 PSF. Times Square is next at $2,400. We expect the Financial District retail rent levels to make improvement over the next few years as tourist sites such as the Statue of Liberty and the 9/11 Memorial and Museum attract tourists, more residential projects are completed, and office occupancy levels improve. Recent IRR assignments include Time Warner Center, new multi-level construction on Houston Street, and the retail condo at 11 Times Square which is home to Urbo and Señor Frog’s eateries.
Download the full version PDF of this Local Market Report below. It includes graphs and tables.
IRR Mid-Year Viewpoint 2015 comprises a National Overview report and 300+ two-page Local Market Reports for all key property types as well as additional resources, including metrics methodology, graphs, and tables; these free reports may be downloaded from IRR’s site here.