A wave of brands has left its flagship stores in what was the most expensive street in the world to open a commercial business, pushing down the rents.
If Audrey Hepburn returned today to have breakfast at Tiffany’s, she would probably do it among “for rent” signs. The Fifth Avenue, unbeatable for years as the world’s number one for retailers, is no longer shining as it used to: Lord&Taylor, Ralph Lauren and Gap, three emblems of US fashion, have closed their flagship stores, and the rate of premises for rent reaches 20%. Is this the end of an era?
The big question is: how many empty premises are there in the almost ten kilometers of avenue? Last September, the New York Times published in an article that the rate was at 20%, but although the figure was spread through many US media the source ended up retracting and putting up the information into context.
That rate was used to defend the proposal of the so-called Small Business Jobs Survival Act, based on freezing the rents for ten years in order to protect small traders. According to experts from the sector quoted in the newspaper Commercial Observer, however, the figure would be below 10%. Another article from Bloomberg claimed that, throughout all Manhattan, there were 143 empty premises at the end of 2017, which led to lowering rents.
What is registered is the availability rate, which includes all the premises for commercialization, active or not, and it excludes new developments such as Hudson and Yards. According to a report by Cushman&Wakerfield, the availability rate is around 20% in all stretches of the Fifth Avenue.
Between the 42nd and the 49th, the rate of availability stood at 23.3% at the end of the fourth quarter. That was also the stretch where prices were reduced the most, with a fall of 12.5%, to 996 dollars per square feet and year.
Between the 49th and the 60th, the availability shot up to 27.5%, and prices reached 2,668 dollars per square foot, 10.5% less than the previous year. Finally, in the most premium stretch, between the 49th and the 60th, 14.5% of the area is on the market.
Gap, Lord&Taylor and Ralph Lauren closed in the Fifth Avenue over the last two years
In 2018, rents in that stretch dropped by 26.6%, going from 28.262 euros in 2017 to 20.733 euros per square meter and year, according to the latest report Main Streets Across the World 2018, published by the real estate consultancy Cushman&Wakerfield.
This is the lowest figure since 2011, when rents stood at 16.704 euros per square meter and year, and are 63% below the maximum of more than 33,000 euros registered in 2016.
The fall also costed it to lose the gold in the ranking of the most expensive streets in the world to open a store, which went again to the Hong Kong neighborhood of Causeway Bay, with 24,606 euros per square meter.
Wave of closings
It is said that whoever succeeds in New York can do it anywhere. In retail, opening a store in the Fifth Avenue was, at the very least, a great statement of intent. There begins and ends most of the iconography of the symbolic capital of the Western world: the Rockefeller Center, the Empire State, the Metropolitan, Tiffany’s flagship store and Saks Fifth Avenue department stores.
Icons that, at least in retail, are starting to be part of an ancient world. The premises that had been occupied for more than one century by Lord&Taylor, one of the most emblematic of distribution in the American country, will serve as offices for the giant of coworking WeWork, which bought the entire building in 2017. Henri Bendel, Gap, Ralph Lauren and Versace are also closing its points of sale. The Tiffany’s store where Hepburn had her breakfast is also closed, although in that case it is to carry out a large refurbishment of 250 million dollars.
The availability rate is around 20% in all stretches of the Fifth Avenue
Although they come simultaneous in time, the reasons for the closures are not the same as the Apocalypse Retail. This phenomenon is justified by the high commercial density of the United States, the transformation of the distribution sector and the high debt accumulated by large trade groups, especially department stores.
In New York, on the other hand, stores were more aimed at marketing rather than at sales, but it has been the continued rise in rents that has ended up expelling the tenants. The sums do not add up, especially in a sector in slowdown such as fashion: being in the largest showcase in the world at any price is not worthwhile anymore.
This transformation occurs, however, in a context that does not seem disadvantageous at first. Tourism, one of the main drivers of trade growth in New York and footfall on the Fifth Avenue, broke records again in 2018, with 65.1 million visitors. Retail sales, meanwhile, grew 6.3% in Manhattan last year and will slow to 4.3% this one, according to Moody’s.
It is not time, yet, to ring the alarm bells of the Apocalypse (not even the retail one) in the Big Apple, but its closed blinds and empty premises are, at least, symptom of the end of an era: The era in which flagship stores were the epitome of commerce and the Fifth Avenue was the best location of the city to gather all the fashion stores. Today, e-commerce is advancing at a fast pace, fashion is no longer El Dorado for retailers and New York sees the East increasingly taking its hegemonic role in the world.