The retail slowdown has become a key theme in the narrative of the market over the last year-and-a-half. Brokers bemoan stubborn landlords holding out for higher rents, but many landlords remain optimistic they’ll find tenants willing to pay top dollar for a presence on the city’s most popular shopping corridors.
Not so, says Billy Macklowe. “I think retail is fucked, plain and simple,” the head of the William Macklowe Company said Friday, adding that the signs are obvious to anyone walking down Fifth and Madison avenues or around Soho. “If you do that, just on a visual basis, you will get to a radical vacancy rate the major brokerages aren’t putting out there,” he said.
Empty storefronts signal the stalemate between tenants who won’t pay higher rents and landlords who refuse to accept lower prices. “The first landlord that blinks” will reset the market, said Macklowe, speaking at the Haute Residence luxury real estate summit at the Core club. “Every retailer will pounce and smell blood in the water.”
Don Peebles, a fellow panelist and head of the Peebles Corporation, said residential developers had in the past seen retail as another avenue for value creation in new buildings. “Now we’re in an unknown space,” he said. He described retail vacancies on Fifth Avenue as a “bloodbath” and said retail throughout the city has weathered “dramatic” price adjustments.
On Fifth Avenue, availability rates have jumped to 16 percent, Cushman & Wakefield data show. Earlier this month, Ralph Lauren announced it was closing its Fifth Avenue Polo store. And Vornado Realty Trust’s Steve Roth anticipates a moment in the near-future where well-capitalized firms would be in a situation to “feed on the carnage” caused by the “rightsizing” of the retail market. Roth, however, predicted that flagship retail would only grow in importance.
Roth’s view was echoed on Friday’s panel by Mitchell Moinian of the Moinian Group. He discussed his firm’s vacancies 535-545 Fifth Avenue, where the NBA leases nearly 30,000 square feet, leaving another 60,000 square feet up for grabs. “You don’t have to necessarily cut rent, but the approach to rents are different,” he acknowledged. “To be on Fifth [Avenue] in New York City, that’s something we believe retailers will always want, even if Ralph [Lauren] is closing his store.”
(To view a ranking of the top retail leases of 2016, click here)