CompStat: E-Commerce Hits Peak, Possible Trophy Office Plateau, Equinox’s NYC Retail Power, Phoenix Faces Industrial Glut

SKIP AHEAD TO

• Class A- and B+ Office Rents Climb in 2024 Amid Limited Trophy and New Construction Supply
• Equinox is Manhattan’s Largest Retail Tenant
• Rent Growth in Houston is Outpacing Phoenix in Recent Quarters Due to Influx of New Supply in Phoenix

Economic Updates:

• The U.S. announced 25% tariffs in February on all steel and aluminum imports, set to take effect in March. In 2024, Canada was the largest supplier of steel to the U.S. (6 million metric tons) and the top supplier of aluminum (3.2 million metric tons).
• The first tariffs imposed on U.S. imports of steel and aluminum were announced in March 2018, and since then the Producer Price Index for automobile manufacturing is up 12.5% as of January 2025.
• The Consumer Price Index moved higher for the fourth consecutive month in January up 3% year over year compared to 2.9% in December. Core CPI, which strips out food and energy, rose an annual 3.3%, up from 3.2% the prior month.
• Consumer sentiment began 2025 comparatively weaker than in 2024. The index fell for the second straight month in February, dropping 4.6% from the previous month to 67.8, its lowest reading since July 2024.
• Retail and food services sales, adjusted for inflation, posted their largest month-over-month decline since February 2023 in a sharper-than-expected drop in January.
• E-commerce’s share of retail sales hit a milestone in Q4 2024, peaking at the previous all-time high of 16.4% reached in Q2 2020, continuing to underpin industrial demand
• Logistics managers are anticipating greater warehouse utilization and lower capacity in the coming months, per the Logistics Managers’ Index, which registered warehouse capacity at 51.7 in January, down 5.2 points from the prior month. Meanwhile, warehouse utilization rose 6.6 points to 68.3, a full 10 points higher than the previous year.

Full economic updates:

Class A- and B+ Office Rents Climb in 2024 Amid Limited Trophy and New Construction Supply

According to a recent Bisnow article, trophy office space is becoming increasingly scarce after several years of strong leasing activity. As a result, tenant demand may now be shifting to lower-tier office space, particularly Class A minus and Class B plus properties in Manhattan, especially as the pipeline for new construction remains limited. CompStak’s data shows that this dynamic may be contributing to rising effective rents in recent quarters when evaluated across major markets including New York City. Across gateway markets, the average effective rent for Class A minus space increased for five consecutive quarters through Q4 2024, though it remained approximately 45% below the average Prime Class A rent. Meanwhile, Class B plus space saw a year-over-year increase, reaching $43.41 by the end of 2024—a post-COVID high.

Equinox is Manhattan’s Largest Retail Tenant

According to recent figures released by Equinox, the luxury gym is now Manhattan’s largest retailer for square footage after opening two substantial locations in 2024 including a 30,000-square-foot location at 75 Varick Street in Hudson Square. While the retailer is paying about $1600 per square foot on the ground floor of that lease, on average the gym retailer is paying on average $359 per square foot on the ground floor portions of their Manhattan locations overall according to CompStak data. However, according to CompStak data, the most expensive location according to rent being paid today is at 568 Broadway, which ranks it as the 58th highest retail rent being paid in Manhattan in CompStak’s data. Just one gym ranks higher with Blink Fitness’ location near Grand Central with a $1850 per square foot rent annually, which ranks within the top 50 rents for retail being paid in Manhattan overall, according to CompStak.  Within the top 50 retail rents being paid today, more than 60% of the tenants are in luxury apparel or jewelry with another 22% in other non-luxury apparel.

Rent Growth in Houston is Outpacing Phoenix in Recent Quarters Due to Influx of New Supply in Phoenix

Recent deliveries of industrial space are defining performance in many markets, particularly in those that were hot for new deliveries in 2024. A report from industrial landlord Prologis found that for the first time in 15 years, rental growth for logistics properties turned negative last year, owing to excess supply and calling out the Phoenix and Houston markets in particular. According to CompStak data, year-over-year growth in average starting rents in the Phoenix industrial market well outpaced Houston’s from Q2 2022 to Q4 2023, but Houston’s has taken the lead by that measure in more recent quarters. Markets where new construction was less robust, such as Houston, though, are recently seeing positive growth in effective rents, while those in construction-dense Phoenix are seeing longer lease-up times and concessions that are trending up toward prepandemic levels. From 2019 to 2024, average effective rents in the Houston industrial market increased by 45.2% compared to Phoenix’s 88.9%, per CompStak data.