Midtown Manhattan ranks high among biggest retail jobs in New York City
People walk past office buildings in midtown Manhattan on May 7, 2021 in New York City.
Angela Weiss | AFP | Getty Images
Before the pandemic, it would take Rob Byrnes at least 15 minutes to line up and grab a quick lunch at a quick and casual restaurant in downtown Manhattan. Now, among the minority of people returning to area office buildings, Byrnes says he walks in and out with his meal in under two minutes.
But he would much prefer to be in a line full of people again.
“We’re a long way from where we need to be to have a sustained retail and restaurant climate in this region,” said Byrnes, president of the East Midtown Partnership, a business improvement district that s ‘stretches over part of the downtown 48 blocks. “It’s still pretty quiet.”
Many companies that have pledged to bring their employees back to the office after Labor Day have put those plans on hold, potentially until 2022, with the spread of the delta variant and a flu season looming. The delay has been especially hard on downtown businesses, which have the largest office inventory in New York City.
As of this summer, nearly 30% of retail storefronts in Midtown East and around Grand Central were vacant, according to a new report from the Real Estate Board of New York, or REBNY. This compares to a retail vacancy rate of 28.4% on Madison Avenue and 20.9% on the Upper East Side. This is the highest rate of any Manhattan borough, REBNY said.
Historically, the Midtown East and Grand Central corridors have maintained a retail vacancy rate of between 10% and 15%, according to the Association of Real Estate Professionals.
“We need to get people back to the office to keep this economy going,” Byrnes said.
Before the pandemic, REBNY estimates that the office population in Midtown East and Grand Central supported 2,579 businesses, including restaurants. The neighborhood captured about 11.4%, or $ 6.5 billion, of Manhattan’s annual retail sales.
Today, REBNY says 93 of the retail storefronts are unoccupied. On a stretch of commercial real estate across from high-end department store operator Bloomingdale’s, the former Gap, Banana Republic, and Victoria’s Secret locations are vacant, leaving the entire block along Third Ave. between 58e Street and 59e The rue St emptied itself.
“These results confirm the crippling effect the pandemic has had and continues to have on the downtown retail industry,” said Fred Cerullo, President and CEO of Grand Central Partnership. “For these businesses to thrive, they need the kind of foot traffic generated by tourists and office workers.”
“They all contribute to the economic ecosystem that generates billions of business activity and tax revenue, which the city also needs more than ever,” Cerullo added.
Storefronts remain empty, even as rents around the city center have fallen, a sign that businesses are still failing to gobble up space. Or they don’t plan to come back at all.
From 42sd Street at 49e St. along Fifth Avenue (near Grand Central), average asking rents this spring were $ 615, down 12% year-over-year, according to REBNY’s semi-annual rental report. And along 57e from 5e Ave. at Park Ave. (Midtown East), average asking rents were $ 531, down 22% year-over-year.
According to Gene Spiegelman, vice president and director of leasing firm Ripco Real Estate, additional pressure is coming as a number of national retailers – including Gap and Victoria’s Secret – have proactively selected their properties. real estate, because shopping moves online.
“Companies are also changing their perspective on flagship retail,” said Spiegelman. “So it’s complicated beyond Covid. But Covid hasn’t helped.”
There is still a long way to go to get people back to offices. Only about 29% of employees in the New York metro area entered office buildings the week of September 29, according to data from security firm Kastle Systems. This was up from 27.6% the week before. But it was still below a national average of 35%, Kastle said.
A separate survey by the New York City Partnership recently found that Manhattan employers expected only about 41% of their employees to show up in offices by September 30, compared with 60% expected when the survey was conducted in May.
According to Cushman & Wakefield, a record 19% of the nearly 250 million square feet of downtown office space – roughly 47.4 million square feet – was vacant in the second quarter of this year.
“The worst part is we don’t know where the bottom is,” said Jessica Walker, president and CEO of the Manhattan Chamber of Commerce. “Tourism has been hampered, which is also an important part of the economy and foot traffic in the city center.”