In the major shopping corridors in Manhattan, where sidewalks are lined by ground-floor shops, retail rents have been declining for years – and not just by a little, but by 20%, 30% or even over 40%, amid ballooning vacancies. The brick-and-mortar retail meltdown, Manhattan style. Then came the Pandemic. In the spring during the lockdown, as hospitals and morgues were overwhelmed, the market for street-level retail space froze up. Later in the year, retailers and landlords started making deals again, with “asking rents” falling by as much as 25% year-over-year, and by as much as 55% from the peak in prior years. And “taking rents” – rents actually agreed on – were reported to be even lower.
In theory, drastically lower rents would attract more interest from retailers. But the brick-and-mortar retail model is broken. Ecommerce rules. Even luxury retailers have figured out during the Pandemic how to sell their merchandise online. While grocery stores, along with bodegas in the neighborhood for last-minute purchases, and some other services-focused enterprises, such as barbershops, hair salons, and nail salons, are seen as essential by many consumers, much of the rest of retail can be and has been shifted to ecommerce. Cafes and restaurants can replace retail stores, but at some point, the street is going to be saturated with cafes and restaurants.Stunning Brick & Mortar Meltdown, Manhattan Style: The Collapse of Retail Rents Before & Now During the Pandemic | Wolf Street