The Reel

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A blog for breaking sales and neighborhood real estate news.

In 2014, retail properties were a driving force of investment sales dynamics.  Through 3Q14, the retail dollar volume for Manhattan was $2.5 billion, almost three times as much as 2013’s annual total of $915 million. With more large-scale retail deals pending, for example the St. Regis retail condo for $700 million and the 432 Park Avenue retail condo for $450 million, 2014 will likely set an all-time record. The strong demand for retail assets is reflected by the recent surge in value as the average price per square foot for retail properties was $3,113 in 2014 – an increase of 68% over 2013.

A main reason why retail properties are doing so well in 2014 is rental growth. In prime and emerging prime corridors, retail rents have increased considerably over the last two years.

This is based on a number of factors:
-Certain retailers have to be in certain locations of certain cities - prime Manhattan is one of those locations
-Having a store in these locations is not only important for sales purposes but those stores are used as a brand building and/or marketing tool
-Record high tourism numbers are strongly supporting retailers in the city

Elevated rents in prime corridors force retailers to rent space in the next best locations: the 'edge-of-prime' locations.  Rents in those prime and edge-of-prime locations have begun to experience increased rental growth elevating property values.  As a result, the trend of retail driving up sales is spreading.