The rent was too damn high

Fifth Avenue is in a liquidation mode of sorts — at least when it comes to mega retailers.

In the past six months alone, Versace, Lord & Taylor, Henri Bendel and the Gap have all closed shop on the luxe stretch or announced plans to relocate.

Meanwhile, the availability rate — a measure of space that’s available now or will be in the next 12 months — is climbing to historically high levels, and rents are falling.

Most analysts agree that Fifth Avenue is getting hit particularly hard by the retail slowdown thanks to its astronomically high rents. In fact, until 2018’s second quarter, retail rents on the stretch were the highest in the world. A recent report by Cushman & Wakefield, however, found that Hong Kong’s swanky Causeway Bay has now grabbed that title.

But losing that label may be a good thing.

“Rents in New York City got ahead of themselves,” said Craig Slosberg, senior managing director at Newmark Knight Frank Retail.

The Fifth Avenue retail departures come even as tourism in the city is hitting new records and as at least one forecast (from Moody’s) found that Manhattan’s retail sales would actually grow by 5.5 percent in 2018.

Still, Slosberg said “new owners” — aka those who paid high prices to buy properties on the strip at the market’s peak and are now struggling to lock in retailers at the rents they were banking on — are unable to meet lenders’ pro formas. It doesn’t help matters that there are barricades around Trump Tower — a reality that is translating into a “falloff” in foot traffic for retailers “within a block and half” of the building, Slosberg said. Here’s a look at the latest happenings on Fifth Avenue. 

25K sq. ft.

The size of the space that Versace is vacating at its 647 Fifth Avenue flagship. The Italian fashion brand, which is being acquired by designer Michael Kors, is now looking to sublease the space for five years and move “farther uptown.”

27.5%

The rough availability rate of Fifth Avenue between 49th and 60th streets. That means that about one in four properties is  seeking new tenants along the stretch. Only retail corridors along Madison Avenue and in Herald Square had higher availability rates, at roughly 28 percent and 32 percent, respectively.

2

The ranking Upper Fifth Avenue now has on the world stage when it comes to retail rents. The strip lost the No. 1 spot, which it’s held since 2014, to Causeway Bay. London’s New Bond Street and Paris’ Avenue des Champs-Élysées placed third and fourth, respectively, for 2018.

24%

The drop in rents this past fall on Fifth between 49th and 59th streets, according to REBNY. Cushman’s fourth-quarter stats pegged average rents at $2,668 a square foot from 49th to 60th — down 10.5 percent year-over-year. And asking rents between 42nd and 49th fell below $1,000 for the first time in about six years.

3

The number of floors that the Gap occupied on Fifth Avenue between 53rd and 54th streets. The retailer claimed the store was “underperforming” and was scheduled to be out by the end of last month. The Gap’s new CEO, Art Peck, also recently said that the company would shut down stores “that do not fit the future vision quickly.”

$250M

The estimated cost of the renovation that Tiffany & Co. is planning for its 124,000-square-foot flagship at 727 Fifth, which is owned by the Trump Organization. Meanwhile, Puma inked a 15-year-lease for 24,000 square feet at SL Green Realty and Jeff Sutton’s Wharton Properties’ 609 Fifth in May. The starting rent on the deal is $8.9 million.

$11.5M

McDonald’s annual rent at its new Times Square location. The lease was NYC’s most valuable for 2018. The last time Fifth nabbed the priciest retail lease was in 2016, when Nike inked a $35 million deal at 650 Fifth. The year before that, Swatch Group paid $35 million for the retail space at the St. Regis, also on Fifth. 

106

The number of years Henri Bendel was opened at 712 Fifth before closing last month. But the retailer is still on the hook for $6.5 million in rent until 2021, when its lease expires. Lord & Taylor also closed last month. But WeWork, now known as the We Company, announced the purchase of the building in 2017 and plans to use the space as its headquarters.