H2 2025 Manhattan Retail Report: SoHo Leads Historic Recovery

Manhattan's retail market has achieved a milestone recovery in 2025, with prime corridor vacancy hitting its lowest level since 2017. SoHo continues its dominance as the borough's most competitive submarket, while luxury and new-to-market retailers drive sustained demand across premier shopping districts.

Market Fundamentals: Historic Lows

Manhattan's prime retail corridors saw their lowest vacancy rate since 2017 in Q2 2025, hitting 14%. Availability in prime urban locations remains near historic lows at 4.2%, driving intense competition and robust leasing activity.

Asking rents reached a post-COVID record of $608 per square foot, an 11% year-over-year jump. Asking rents rose 2% year-over-year overall, with high-traffic Manhattan streets commanding premiums above $500/SF. Herald Square represents the exception, with the highest vacancy rate at 35% of spaces available.

SoHo: The Crown Jewel

SoHo saw a remarkable 19% rise in average asking rent year-over-year, reaching $351 per square foot. Broadway in SoHo experienced the highest jump in demand with a 24.1% increase in average asking rents.

The rapid recovery of SoHo and Madison Avenue retail market demand over the last 18 months underscores Manhattan's continued appeal as a must-have location for luxury retail. Luxury apparel and accessories absorbed most quality storefronts on Madison Avenue and in the heart of SoHo several quarters ago.

Notable 2025 SoHo transactions include Los Angeles Apparel moving into 24,700 square feet at 480 Broadway and members-only club Lightning Society signing for 19,000 square feet at 427 Broadway. Ferrari's expansion to 92 Prince Street exemplifies luxury brand commitment to the neighborhood.

Demand Spillover Effect

Competition for highly visible storefronts in prime shopping corridors like SoHo and Greenwich Village has intensified, creating a spillover effect with demand spreading into nearby areas. Smaller urban storefronts under 5,000 SF maintained strong demand, particularly in Manhattan corridors like SoHo, Fifth Avenue, and the West Village.

This scarcity is forcing tenants to expand their search radius and move decisively when opportunities arise. Brands that hesitate often lose out to faster-moving competitors.

Investment Activity

Empire State Realty Trust's acquisition of the Scholastic Building for $386 million in a cash sale-leaseback arrangement demonstrates institutional confidence in SoHo retail. The property, with around 70% occupancy, features retail space leased to Sephora and Capital One.

Cap rate compression in prime locations continues as investors compete for quality assets with strong tenancy. SoHo exposure remains highly sought after.

Luxury Retail Dominance

The luxury sector continues driving prime corridor absorption. Major fashion houses maintain their commitment to Manhattan's premier shopping districts, viewing flagship locations as essential to global brand strategies.

This luxury demand creates a virtuous cycle: high-end tenants attract affluent shoppers, driving foot traffic that benefits neighboring retailers and justifying premium rents.

Who's Leasing

Food and beverage tenants remain highly active, providing the experiential draw that anchors retail corridors. New-to-market retailers (digitally native brands opening first physical locations) continue representing significant leasing volume, validating physical retail's importance even for e-commerce-native companies.

This combination of experiential dining, luxury fashion, and DTC brands creates the dynamic tenant mix that characterizes Manhattan's most successful retail corridors.

B-Class Reality

While prime locations thrive, the bifurcation between A and B-class corridors persists. Secondary locations face persistent vacancy and rent pressure, requiring realistic pricing and creative tenant strategies.

Landlords of secondary assets must consider repositioning, alternative uses, or significant concession packages to attract tenants. The flight to quality shows no signs of reversing.

2026 Outlook

The fundamentals supporting retail recovery remain strong entering 2026. Tourism has fully rebounded, office return-to-work initiatives drive weekday foot traffic, and consumer spending remains resilient.

Key constraints remain on the supply side. Limited new retail development and ongoing conversions continue reducing inventory, intensifying competition for quality space. Tenants with 2026 requirements should already be engaged in their search process.

We expect continued rent growth in prime corridors, sustained low vacancy in SoHo and Madison Avenue, and potential expansion of the "prime" definition as spillover demand activates adjacent neighborhoods.

Strategic Implications

For tenants: Prime corridor availability is exceptionally limited. Early engagement and decisive action are essential. Expect competition for quality spaces and realistic timelines for buildout and opening.

For landlords: Prime assets can pursue rent growth while maintaining high occupancy. Secondary assets require realistic strategies, potentially including alternative uses or significant tenant concessions.

For investors: SoHo and Madison Avenue assets command premium pricing with justification. Value-add opportunities exist in transitional corridors but require capital and patience.

Conclusion

Manhattan retail in H2 2025 represents a historic recovery, with vacancy at multi-year lows and rents at post-COVID highs. SoHo's 19% rent growth and intense competition exemplify the market's strength.

The bifurcated market rewards strategic positioning. Prime corridor participants benefit from scarcity and demand, while secondary players must adapt or face continued challenges. Understanding these dynamics will determine success in 2026 and beyond.

Data sources: REBNY H1 2025 Manhattan Retail Report, CBRE, The Real Deal market analysis.