Sephora just landed a steep discount on a plum retail location on Madison Avenue and 53rd Street.
The LVMH-owned cosmetics retailer renegotiated a 20-year lease for 6,300 square feet of the ground floor at 520 Madison Avenue for another 18 months with a price reduction of two-thirds, Crain’s reported.
The lease comes out to $156 per square foot in the 43-story, 1 million square-foot tower developed and owned by Tishman Speyer, reducing its annual rent from $3 million to $1 million. Sephora has two other locations on Madison Avenue.
The deal still beats a vacant ground floor for Tishman, who also owns the MetLife Building and Rockefeller Center. Mark Cohen, a retail consultant and former director of retail studies at Columbia Business School, told Crain’s it’s harder to lease office space in buildings with an empty storefront.
520 Madison Avenue is facing a number of significant vacancies: Citadel gave up 70,000 square feet on two floors last year, Crain’s said according to KBRA. Carlyle, the second-largest tenant with 140,000 square feet, is reportedly looking to sublease it. And Davidson Kempner is relocating from its 70,000 square-foot office to 9 West 57th Street after its lease expires next year, according to Crain’s.
Crain’s said that occupancy at 520 Madison Avenue is still at 96 percent and Tishman’s $675 million dollar mortgage isn’t due for another ten years.
The deep discount comes as the city sees serious rent reductions elsewhere on commercial space in the wake of a 15 percent vacancy rate, according to Evercore SI.
Retailers have more leverage in lease negotiations where there are plenty of relocation options.
The Real Estate Board of New York reported this week that there is “ample availability” of storefront space in the city, according to Crain’s.
Skims Body, Kim Kardashian’s brand, got a Fifth Avenue space for $150 per square foot, which was 80 percent less than its predecessor, Versace. Skims agreed to pay more on sales above $10 million. Nearby, Mango is subleasing Ralph Lauren’s US flagship store at 711 Fifth Avenue at an 80 percent reduction. Ralph Lauren just reorganized some of its Manhattan space last year.
— Christina Previte
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