New York City office
and retail Market Research

March 2021

March 2021 New York Commercial Real Estate Market Report

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Manhattan Office:
Manhattan office vacancies have surpassed 15% as subleases, new construction and expiring leases are not being renewed due to corporate downsizing. Expect office rents to fall in the foreseeable future.

Manhattan Retail:
Expect retail rents to fall as 30% of the remaining restaurants fail. Other retailers will be forced to turn over empty spaces when landlords are able to pursue evictions.

Manhattan Sales:
Expect sale prices to continue to fall as office, retail and residential rates continue to fall. Prices for Manhattan’s office condominium market showed a 32% drop in price per square foot, from $909 to $616 from the previous year.

New York Market Overview

Manhattan Office:

Office subleases increased to 29 million square feet, well over the 27 million square feet recorded during the financial crisis in 2009.

The office availability rate rose for the eighth consecutive month to a record-high of 14.9%, up 0.6% points from the previous month of 4.9 points from a year ago.

Leasing volume was 1.9 million square feet, but still 47% below the pre-pandemic monthly average. The average asking rent declined for the seventh consecutive month to $73.65 per square foot per year, the lowest average since April 2018.

Only about 14-15% of employees were in their New York area offices as of Feb. 17. HSBC is banking on remote work and is giving up office space the company will switch to a hybrid model where employees will have the option to work from home. As part of the switch, the bank is expected to reduce its real estate footprint by around 40%. Yelp is moving to a hybrid office model and will transition to allowing employees to work remotely either full-time or part-time. Though Yelp will maintain its presence in places where it has offices, including its San Francisco base, it will shed and sublease some space. WeWork has cut its rents across the country and its rental fees in November and in January by an average of 10%. In recent months, the company has closed and exited four locations in Midtown, Soho and the Meatpacking District. It also recently closed one of its oldest locations in the Financial District.

Condé Nast is involved in a lease disagreement at One World Trade Center where they lease 1.2 million square feet and have not paid the $2.4 million it owes in rent for January. Conde Nast hopes to move to a smaller office in Midtown or New Jersey’s Gold Coast. The Port Authority of New York & New Jersey and the Durst Organization aren’t prepared to let the company go so easily, especially considering its lease extends through 2039.
Knotels bankruptcy filing includes $20 million in financing to aid with Knotel’s sale to Newmark Group.

Industrious has 3 million square feet of space and plans to add another 1 million in 2021 and has opened three New York locations. In March, it plans to open a 53,000-square-foot location at 44 West 37th Street, and a 60,000-square-foot site at 135 W 50th Street. By the end of the year, a 100,000-square-foot site at One Penn Plaza is expected. These new additions will make New York the company’s largest market, with 580,000 square feet.

Manhattan Retail:

About 4,000 restaurants in New York City have shut since the pandemic began 11 months ago.

32 is the number of vacant storefronts along 17 blocks of some of the most expensive retail real estate in the world. Those 32 vacant storefronts, a quarter of the 119 storefronts, can be found on Fifth Avenue between 42nd and 59th streets.

The situation for New York City’s restaurateurs and their landlords got even more dire at the end of 2020. 92% of restaurants could not pay their full December rent, the highest that number has been since the pandemic began. That number has also increased every month during the health crisis; in June, 80% of restaurateurs couldn’t afford rent, and it’s steadily risen since. Of those who could afford some rental payment at the end of 2020, just 49% paid half of their rent, while 28% paid less than half.

The number of seated diners on Valentine’s Day was only 56% lower than it was the same Sunday a year ago, the smallest decline since restrictions began last March.

Warehouses that are leased to major companies like Amazon which planned to increase its industrial square footage by 50% in 2020 are seen as especially attractive.

Restaurants will be allowed to resume indoor dining on Friday, Feb. 12, two days earlier than previously planned. Previously, indoor dining was set to return on Valentine’s Day. Restaurants will be allowed to operate indoors at 25% capacity.

Victoria’s Secret will close 30 to 50 stores in the United States and Canada after it had already closed 241 stores in 2020. The closures will leave Victoria’s Secret with 848 stores across two countries, down from more than 1,100 just a year ago.

Gucci, the luxury fashion house, recently renegotiated and extended its lease at Trump Tower on Fifth Avenue. In exchange for extending its lease beyond 2026, the retailer received a reduction in rent.

The city lost two-thirds of jobs in entertainment, recreation and the arts, erasing a decade of economic gains in an industry which drew millions to the city each year.

Pearl River Mart will remain in Soho and will close its flagship store at 395 Broadway in early 2021, and move to 452 Broadway, between Howard and Grand streets.

After a near year-long shutdown, New York City cinemas will reopen at 25% capacity or no more than 50 people per screening starting March 5.

Best Buy laid off 5,000 full-time workers this month and will add 2,000 part-timers. It has closed about 20 of its big-box stores in each of the past two years but expects to close more this year.

CVS signed a 15-year lease for 19,350 square feet at the Astor Building located at 217 Broadway , just south of City Hall. CVS will occupy 6,850 square feet on part of the ground floor and 12,500 square feet on the second floor.

A 2-year lease by Valentino will open its first Soho store at 135 Spring Street in a space that’s currently occupied by Diesel. Valentino is expected to take over the nearly 8,800-square-foot duplex space at the end of February, and will open later this spring.

Brooklyn Fare, a grocer, has signed a 25-year, 21,600-square-foot lease at the base of 75 West End Avenue. The asking rent for the space was $85 per square foot.

Dylan’s Candy Bar at 1011-1029 Third Avenue is closing. The property at 1011-1029 Third Avenue, which includes Dylan’s nearly 13,000-square-foot store, is listed for lease.

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