Author: Steven Llorens

The U.S. shopping center market demonstrated resilience during the second quarter of 2024, as highlighted by global commercial real estate firm Cushman & Wakefield in their Q2 2024 National Shopping Center Report. Despite decelerating growth in consumer spending, several key performance metrics, including the national retail vacancy rate, remained stable. The national retail vacancy rate remained unchanged at 5.3% in the second quarter—the lowest level experienced in nearly the last two decades. 

The expansion of Whitestone and Bay Terrace Shopping Centers illustrates the ongoing demand for retail spaces in urban environments despite the rise of online shopping. These developments have provided essential services and shopping options for Queens residents, reinforcing the vitality of brick-and-mortar retail in the city. As the commercial real estate market continues to evolve, these centers will need to adapt to the challenges posed by e-commerce and rising operational costs. 

The rise in interest rates since 2022 has had a profound effect on the U.S. commercial real estate (CRE) market, especially in major cities like New York. The Federal Reserve’s aggressive monetary policy to combat inflation has brought interest rates to levels not seen in over two decades. Cities like New York are particularly affected, but the trend is seen nationwide in markets like Los Angeles, Chicago, and Dallas. 

Recent outbreaks of diseases continue to reshape how businesses and employees interact with office spaces. The spread of Respiratory Syncytial Virus (RSV) during the fall and winter seasons and the emergence of new COVID-19 variants reinforce the need for office environments that prioritize safety and wellness. In cities like New York, one of the largest commercial real estate hubs, the impact of office redesign is palpable. Office spaces that once maximized capacity and shared workspaces now face pressure to adopt healthier, more flexible designs.  

The second quarter of 2024 proved to be a milestone for Midtown, New York, as it recorded significant leasing activity, with three of the top five largest transactions in Manhattan taking place in this commercial hub. Notable among the top five lease transactions were Bloomberg’s massive extension at 731 Lexington Avenue, marking Manhattan’s largest lease since 2019, and Industrious’ new lease at 12 East 49th Street.

Manhattan’s office market showed renewed vigor in Quarter 2 of 2024, with leasing activity growing by almost 30% compared to Q1. This is equivalent to a total of 8.17 million square feet (SF) of office space leased, which is comparable to about 139 football fields.

Manhattan’s luxury retail market is undergoing a transformation, driven by a rebound in demand for high-end commercial spaces and the need for brands to innovate continuously. The luxury sector, traditionally characterized by exclusive brick-and-mortar stores, has experienced both challenges and opportunities over the past few years.

Over the past decade, New York City’s commercial real estate market has been significantly influenced by international investment, with foreign capital playing a crucial role in shaping its landscape. From 2020 to 2024, the dynamics of foreign investment have evolved, influenced by global economic conditions, changes in market preferences, and the impact of the COVID-19 pandemic.

The surge in tourism and foot traffic has a positive impact on cash flow in New York’s commercial real estate sector. In 2023, retail and tourism-related commercial properties in Manhattan, including Times Square, saw a 15% increase in cash flow compared to 2020 levels. This rise is attributed to the return of high-spending international tourists and the renewed interest from global retail brands seeking prime locations in the city.

New York City’s commercial real estate market is undergoing a transformation, particularly in the retail sector, as traditional brick-and-mortar stores struggle to regain their pre-pandemic footing. The retail landscape in Manhattan, which faced significant challenges during the COVID-19 pandemic, is evolving with a shift towards innovative retail concepts that blend traditional shopping experiences with new, engaging elements.