By Keiko Morris 

Asking rents in many of New York City's priciest shopping corridors declined in the first quarter of the year, part of a national retail slump battering landlords across the U.S.

Average prices for ground-floor space in nine of the 11 major retail districts in Manhattan fell in the first three months of 2017, according to real-estate services firm Cushman & Wakefield. SoHo recorded the largest percentage drop in average asking rent from the previous year, falling 12% to $488 a square foot.

The availability rates along most of those corridors also increased, with the stretch of lower Fifth Avenue between 42nd and 49th streets reporting the highest rate at almost 33%.

"We've got a ways to go on this rent reset but the [retail] high street is not dead," said Garrick Brown, national retail-research director for Cushman & Wakefield.

The first quarter results showed a continued readjustment from a dizzying run-up in prices during the recovery from the last recession, brokers and analysts said. Average asking rents for direct ground-floor leases in Manhattan rose 95% from the first quarter of 2011 to the first quarter of 2014, according to real-estate services firm CBRE Group Inc. Average prices during that period rose to a peak of $1,073 a square foot. Since that high point, average asking rents across the 16 areas tracked by CBRE have decreased 21% to $850 a square foot.

The steep rent rise often was difficult for tenants to swallow, as leases signed years ago expired and tenants confronted pricing, said Nicole LaRusso, CBRE's director of research and analysis for the tri-state region.

"It wasn't that they didn't have a viable business," Ms. LaRusso said. "It didn't make sense at the rent the landlord was asking."

At the same time, landlords have begun to step back from previous asking rents as tenants grapple with the broader pressures of e-commerce and the fallout from a period of over expansion that are buffeting the retail industry.

National chains such as Macy's Inc. and Sears Holdings Corp. are expected to close thousands of stores across the U.S. as they reconfigure their distribution channels and try to reach customers both online and in stores. Ralph Lauren Corp. announced earlier this month it would close its Polo store on Fifth Avenue as part of a broader realignment.

A stronger dollar also has the potential to dampen spending by tourists, analysts said.

While some owners of New York retail properties are reluctant to offer drastic rent cuts, they have become much more generous with other enticements such as free rental periods and contributions toward the costs of building out a store, incentives that were rare a few years ago, brokers said.

Opportunities have opened up for food venues, especially health-focused quick-service restaurants, athletic-wear retailers, as well as service-oriented businesses including fitness studios, brokers said.

Discounters and lower-priced retailers are adding locations, many noted. Nordstrom Inc. announced in February it would open a 46,500 square-foot Nordstrom Rack at the Durst Organization's 855 Sixth Avenue location.

Manhattan's top retail districts remain attractive for the sheer volume of pedestrian traffic, Mr. Brown said. Some estimates put about 15,000 people an hour passing on a corner along the stretch of upper Fifth Avenue between 49th and 60th streets, he said. Asking rents in that district are still above $3,000 a square foot.

Moreover, New York City has been adding jobs and tourism has increased, said Hessam Nadji, chief executive officer of Marcus & Millichap Inc., a commercial real-estate brokerage and advisory firm. Spending by visitors is up and expected to rise, he said.

In 2016, 61 million tourists visited New York City, up from 51 million in 2011, according to NYC & Co., the city's official tourism-marketing organization. Spending rose to $43 billion last year from less than $35 billion in 2011.

"New York has more positive trends going for it than a lot of other cities," Mr. Nadji said. "At the neighborhood level it comes down to merchandising and how merchandising is lining up with the foot traffic."

Write to Keiko Morris at Keiko.Morris@wsj.com

(END) Dow Jones Newswires

April 30, 2017 13:32 ET (17:32 GMT)