Development Reaches Cycle High; Investors Seek Value in Outer Boroughs

Broad corporate base powering robust household formation, necessity and specialty retail demand. A diverse employment base, covering a large number of the biggest companies in the country, is fueling stable demand for households. These households have underpinned significant growth in demand for nearby retail, particularly the emerging Hudson Yards neighborhood. Due to the extreme density of the metro, foot traffic remains elevated year- round, with an emphasis on locations along major subway routes. These dynamics have pushed vacancy metrowide to the mid-3 percent range, triggering a sharp upswing in the average asking rent, advancing nearly 50
percent over the current business cycle. Conditions will remain sufficiently tight to once again provide a lift to average asking rents this year.

Developers focus primarily on Manhattan; construction picking up broadly. Retail deliveries will be highlighted by several large projects in Manhattan this year, led by The Shops & Restaurants at Hudson Yards. Meanwhile, new developments are transforming old locations, such as Pier 57 in the Hudson River and Empire Outlets on Staten Island, the metro’s first outlet shopping locale. A focus remains on providing the essential retail that residents need, with nearly 60 projects of 40,000 square feet or less coming online over the next two years. These properties will provide new opportunities for rent growth in select neighborhoods as foot traffic increases.