POLL: Is Fifth Avenue losing its luster amid soaring rents and empty storefronts?
Fifth Avenue is known around the world as the high-end shopping address, but rising rents are leading to an increase in vacant space along the retail corridor. According to data from Cushman & Wakefield reported by Crain’s, the availability rate spiked to 15.9 percent in the third quarter of this year, up 10 percent from the same time last year. On the stretch that has the world’s highest rents, from 49th to 60th streets, retail space is listed at an average of $3,213 per square foot, up from $2,075 in 2011. To put this in perspective, current rents in Times Square are $2,104 per square foot after tripling over the past four years.
This rise in empty storefronts is actually occurring across Manhattan. According to Richard Hodos, a vice chairman at brokerage CBRE Group, “Property trades are being based on achieving ever-higher rents, and nobody ever really looks at what retailers can afford to pay. In some cases, rents need to come down 30% or more for rents to be at levels where retailers are able to make sense of them again.”
6sqft previously explored this trend with Justin Levinson’s Vacant New York map, which noted how the issue is twofold. First, small businesses can’t afford skyrocketing rents (if a small Lower East Side storefront costs about $8,000 a month, a Fifth Avenue address is definitely out of the question), and second, even when huge chains can afford these rents, the negotiation process is often so slow that potential tenants back out.
But there still may be hope for Fifth Avenue. Patrick Smith, a vice chairman of retail brokerage at Jones Lang LaSalle, thinks these empty stofrefronts “will eventually be absorbed,” but the way the space is used will change to focus on the experience as well as the actual merchandise, pointing to how Lululemon offers yoga classes in its stores.
[Via Crain’s]
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