RE market Analysis

11/30/2020

ANALYTICAL STATEMENT

The following analysis will analyze how economic development affects the future of the retail market in New York City and the submarket SOHO area.

PROJECT DEFINITION AND RATIONALE

New York has a wide variety of retailers and a diverse array of retail spaces. New York’s retail market revolves around the buying and leasing of commercial spaces. With thousands of retail stores across all of New York’s boroughs, the retail market drives an important portion of NYC’s commercial real estate. Manhattan has undergone a bulk of new retail construction since 2016 from the height of its last cycle in 2009. During the development of retail stores in New York City, many commercial areas have been formed: Fifth Avenue, Madison Avenue, SOHO, Meat packing District, and the newly developed Hodson yards. Rents and selling prices have also risen with the concentration of business districts.

However, the development of the retail industry has not been smooth sailing. In recent years, with the economic crisis and the rise of e-commerce, more and more retailers have chosen to close some physical stores. What’s more, the retail industry has been hit hard this year due to the impact of COVID-19. Falling rents and fewer tenants make the future of the retail market full of uncertainty.

AREA DEFINATION

SOHO is located south of Midtown Manhattan, New York. It was officially named by the New York City Landmarks Preservation Committee in 1973. It is a community in Soho District. In 2010, soho expanded to cover most of West Broadway, with Lafayette and Center Street on the east side. It currently occupies 73 acres and consists of 26 blocks and approximately 500 buildings.

SoHo, which stands for "South of Houston", was once the destination of famous artists and galleries. Today, SoHo has become one of the most coveted shopping destinations in New York City. It is the center of the cast iron historic district and has the largest cast iron construction population in the world. Retailers use SoHo’s unique storefront, stylish atmosphere, and pedestrian-friendly environment to increase merchandise sales and build unique stores with unique styles. Therefore, many of the world's most well-known retail brands regard SOHO as an ideal display cabinet. High-end designers and fast-fashion stores have created an eclectic shopping experience for domestic and foreign tourists. In the past few years, SoHo has become the preferred neighborhood for pop-up shops in New York City. For innovative first-time tenants eager to test their brands in physical stores, many landlords accept shorter lease terms. (Cushman & Wakefield, 2019-2020)

Fig.1. Manhatten Retail Map (source: CBRE MarketView)

Fig.2. SoHo Neighborhood Map

AREA ECONOMIC AND DEMOGRAPHIC OVERVIEW

Demographics can be defined as; the data describing the structure of a population in terms of gender, age, income, race, migration patterns, as well as population growth. This information is an often ignored but an important factor that influences how real estate is valued and the types of assets in demand at a particular time. In this section, we will analyze the economics and demographics of the Manhattan market and the SOHO market.

-SOHO

According to the latest data, the total population of the SOHO area is 13,246, and the total households are 6,400. Also, there are 1,129 self employees, 5,616 private companies, 297 governmental workers and 950 not for profit companies.

Fig.3. SoHo Employment Data ( source: Point2homes.com)

The average household income is $204,079 and the median household income is $107,240.

Fig.4. SoHo Income Data ( source: Point2homes.com)

SOHO rental market has been growing, with direct mean rental rates increasing by 43.5% from 2005 to 2015, to $33.82 per square foot.[footnoteRef:1] In terms of rental housing, in 2012 soho had a superior percentage of market-rate units (29.5%) than the citywide average (27.2%). The area reported the largest number of occupied units out of the five boroughs in 2014 (942,402). It also has a advanced share of renters (71.0%) compared to the citywide average (67.5%). [1: ]

-Manhattan

Manhattan has a total population of 1,598,291, of which 47% are men and 53% are women. Total Households is 743,231, of which family households account for 42%. Average Household Income is $130,594 and median Household Income is $109,037.

Fig.5. Manhattan Income Data (source: Point2homes.com)

In Manhattan, there are 110,897 self-employees, 588,342 private companies, 72,516 governmental workers and 107,719 not for profit companies. Among them, white collar 822,399 (93.51%) and blue collar 57,075 (6.49%).

MARKET POTENTIAL

The population in Manhattan, currently at 1.63 million residents, has incentivized a diverse array of retailers to move into this New York City borough. New York City’s 8.4 million inhabitants fuel the demand for a variety of goods and services, allowing retailers the opportunity to evolve simultaneously with the demands of new residents. Manhattan continues to have a significant impact on the world’s economy, technology, tourism, and commerce, securing its place as the most important place for retailers in the United States. There is no shortage of shopping in Manhattan’s 23 square miles. With hundreds of stores and brands, Manhattan is a mecca for shopping diversity at every level. New, old, pop-up, and experiential stores forge on as the growing population favors eclectic store options. With a population density of 70,826 people per square mile, Manhattan is the most densely populated county in the United States of America. During the week, the number of commuters increases the Manhattan daytime population to more than 3.9 million people.

The rise of eCommerce

In the past decade, the boom in e-commerce has led to a decrease in retail store traffic and the closure and bankruptcy of several large retail chains. Many physical retail stores have begun to transform in different ways. Let customers experience things that cannot be experienced online shopping in physical stores. Midtown South’s SoHo submarket is Manhattan’s main pop-up target destination, where stores create a physical experience that captures the shopper’s attention, including “Instagramable” pop-up shops and interactive displays which cannot occur online.

Fig.6. SOHO POP-UP Store (source: theculturetrip.com)

COBID-19 Impact

REFERENCE

Cushman & Wakefield, At the Center of What’s Next for Manhattan RETAIL Major Markets Report, 2019-2020 Edition