Don’t freak out (too much) about Five Below on Fifth, brokers say
Discount store will occupy about 11k sf on the street famous for luxury brands
Manhattan’s Fifth Avenue has long been known to house shops for some of the world’s most iconic luxury brands: Tiffany & Co., Rolex, Prada, Gucci and more.
So it came as a surprise when Five Below, a discount retailer whose calling card is not selling anything for more than $5, announced it would open a flagship on the famous street. Multiple retail brokers acknowledged that this was a bit out of the ordinary, but they did not see it leading to a complete transformation of Fifth Avenue.
“It’s more of a symbolic thing, I believe, for Fifth Avenue,” said Christopher Okada, president of Okada & Company. “If it was a 30,000-square-foot store, and it had ’99-cent’ written on it, I think that’s a little bit different.”
Five Below is planning to open its first Manhattan store in November at General Growth Properties’ 530 Fifth Avenue. The store will span 10,800 square feet, which is about 3,000 square feet larger than the average size for the company.
Five Below declined to comment for this story, and GGP did not respond to a request for comment.
Despite the treacherous retail landscape overall, discount stores have been doing well and may become more prominent even in upscale shopping districts, said Timothy King, CEO of the Brooklyn-based brokerage firm CPEX Real Estate. However, he does not view Five Below’s lease as a sign that Fifth Avenue is about to become better known for discount stores than luxury brands.
“Fifth Avenue will always be Fifth Avenue. I don’t think it’s going to become the epicenter of Joe’s Bargain Store,” King said. “But having said that, there is a reality, and if I’m an owner with a vacant space, and a tenant comes along and pays a rent that I’m comfortable with, I’m not sure that I can afford the luxury of saying, ‘No, I can’t afford to put this sort of tenant there.’”
Discount stores have been aggressively expanding in New York in recent years. Retailers such as Family Dollar, Dollar Tree and Lot-Less Closeouts had zero locations in the city as recently as 2008, but by 2017, they had a combined 161 locations, according to the annual State of the Chains report from Center for an Urban Future.
Family Dollar and Dollar Tree expanded particularly aggressively between 2015 and 2016, when they increased from 67 to 79 stores and 10 to 73 stories, respectively.
“Not only are these discount stores seeing the opportunities to expand at a time when other retailers aren’t,” said Eli Dvorkin, CUF’s managing editor, “they are meeting a need in the market that goes a lot further beyond just those New Yorkers who are barely scraping by.”
A recent article in The Real Deal found that these discount stores generally do not end up in high-profile locations. Family Dollar, for instance, had just one store in Manhattan last year compared to 23 in the Bronx.
Gene Spiegelman, vice chairman of Ripco Real Estate, maintained that the section of Fifth Avenue below 49th Street, where Five Below is going, is actually not as high-profile as its Fifth Avenue address might suggest. Most of the luxury brands on the avenue are concentrated above 49th Street, while the section below 49th Street has more affordable stores such as Skechers and H&M. The shoe and skatewear company Vans is also planning to open a flagship store in the same building as Five Below.
He still characterized Five Below’s bid for a Fifth Avenue flagship as an “aggressive move,” but it is one that he believes will work out.
“I think anything that draws shoppers and that’s attractive to customers is positive,” Spiegelman said. “If this was north of 49th Street, I’d have a different read on it. South of 49th Street, I think it’s compatible.”
Okada echoed this sentiment, framing the selection of Five Below as a defensive move for GGP but one that still constituted a victory. Five Below appears to be a fundamentally strong company, he said, so the lease is likely to work out well for GGP and is certainly an upgrade from dealing with vacant space.
“For GGP to not have to worry about having 11,000 square feet of Fifth Avenue retail is good,” he said. “Again, they don’t have the luxury of saying no to Prada or Gucci.”