Retailers, particularly those in the luxury category, still prefer New York to Los Angeles as the location for their flagship stores by two to one, according to a new report by JLL.
“Flagship stores are definitely more important now than they ever were 15 years ago,” said James Cook, who heads the Jones Lang LaSalle’s retail research division that released the report. “As retailers footprint across entire U.S. have shrunk, flagships are bigger and better and more dazzling than ever before. In order to conquer the U.S., retailers need a splashy over the top flagship in a major high traffic U.S. market, and clearly New York is number one.”
The report collected and analyzed the features of flagship stores across four U.S. markets–New York, Chicago, San Francisco and Los Angeles–across all retail price points. Because brands at the high end of the price spectrum are more likely to have flagship stores, 40 percent of the stores surveyed fell within the “luxury” or “luxury lite” categories.
Approximately 50 percent of those had opted to have their flagships in New York City, preferring Fifth Avenue to Rodeo Drive, the report shows. That’s despite Fifth Avenue’s landlords demanding more than four times the rents of their Beverly Hills counterparts. The average asking rent for a Fifth Avenue retail space was approximately $3,500 per square foot in the third quarter as compared to $800 on Rodeo Drive, according to Cushman & Wakefield.
Both apparel manufacturers and department stores overwhelmingly preferred New York. Luxury department store Neiman Marcus, for example, recently signed a lease for a flagship store to anchor the shopping complex at Hudson Yards, despite being headquartered in Dallas, Texas.
Luxury brands that have recently opened stores on Rodeo Drive include Bally, a high-end footwear boutique, which inked a lease for two floors at 340 Rodeo Drive. Chanel bought its long-term Rodeo Drive storefront for $152 million earlier this year in a deal that set a price per square foot record for California of $13,217.
Meanwhile, retailers seeking flagship space on Fifth could have an easier time finding potential locations than in previous years, as landlords are sitting on a record amount of vacant retail space, according to another report.
Nearly 16 percent of Fifth Avenue retail was vacant in the third quarter, compared to just 10 the previous year, according to data from Cushman.