The Download: E-commerce trends and the coronavirus pandemic have caused Manhattan retail rents to drop nearly 13 percent year-over-year to $659 per square foot, the lowest level in almost a decade, according to CBRE. The city’s retail rents have now dropped for 12 consecutive quarters.
Why it Matters: Years before COVID-19, the retailpocalypse was wreaking havoc on the industry not just in Manhattan, but across the country. In a 2019 report released by the consultancy PwC, the U.S. ranked first in per capita leasable shopping center space at 23 square feet per person. (For reference, Europe and Japan average less than 5 square feet per person, though Canada is at 16.)
In Their Words: “We are clearly over-retailed in America,” says Byron Carlock, head of PwC’s U.S. real estate practice. “Suburban sprawl created a situation where we just believed that every time there was a new intersection with four corners we needed to put up four strip centers. We’re learning differently now.”
Surface Says: Recently, conversations over the future of retail have been a constant topic thanks to the rise of DTC brands and shifting consumer spending habits toward e-commerce. The pandemic pulled the future forward, precipitating 27 major retailers—from Neiman Marcus to Brooks Brothers to J Crew—to file for bankruptcy in 2020. What happens to the glut of empty retail space has been the subject of copious think pieces, and will be one of the most closely watched developments in the coming years. One caveat to keep in mind: Although second quarter e-commerce sales of $200 billion were up nearly 45 percent year-over-year, they still only accounted for 15 percent of total sales, estimated to be $1,300 billion.