Store owners hope fewer protests outside Trump Tower and the rollout of Covid-19 vaccines will turn things around.
By guest author Esther Fung from Wall Street Journal
After a very dark period, the sun is starting to shine again on Manhattan’s famed Fifth Avenue retail corridor.
With Donald Trump’s tenure in the White House over, store owners are looking forward to fewer disruptions from protesters and fewer police barricades near Trump Tower, which nearby store owners say have had a dampening effect on their business. Retailers also anticipate that the rollout of the Covid-19 vaccines will help bring back tourists to New York City, where Fifth Avenue has been a must visit for many.
Asking rents have also tumbled about 18% from their 2017 year peak. That’s helping attract new retailers or enticing existing ones to grab more space.
“Retailers should be happy,” said Adelaide Polsinelli, vice chair of the commercial investment sales and leasing division at real-estate-services firm Compass.
Luxury watch and jewelry maker Chopard recently signed a new lease for the Crown Building opposite the Tiffany & Co. store. Toy maker Lego AS moved to a bigger store on Fifth Avenue, where it will occupy 10,000 square feet, or more than double its previous space. Jeweler Harry Winston signed a deal to nearly double its space on Fifth Avenue.
“This is the iconic and historical place for Harry Winston,” said a representative for Swatch Group, which owns the jeweler. “It represents a big opportunity to increase the space for the brand.”
Prime Fifth Avenue—the roughly 10-block stretch from Saks Fifth Avenue at East 49th Street to the southeast corner of Central Park—is trying to emerge from one of its worst periods in many years.
Fifth Avenue has long been synonymous with luxury goods and high-end fashion, home to brands like Rolex, Gucci and Louis Vuitton. The rents were always among the world’s most expensive, but they soared to new highs in the previous decade as international tourism to the city climbed steadily higher. Retailers were often willing to suffer losses at their Fifth Avenue stores, basking in the prestige of the world-renowned address.
Yet even before the pandemic, this exclusive high street had started losing a bit of its luster. As e-commerce invaded the luxury sphere and brands sold more goods online, many tenants had a harder time justifying some of the retail world’s highest rents. The barricades that arrived after Mr. Trump’s election in 2016 discouraged strollers and shoppers, landlords and retailers have said.
Then the pandemic struck the harshest blow, causing tourism to dry up. These stores absorbed yet another hit after looters descended on the city over the summer. Many Fifth Avenue shops boarded up their windows and reduced operating hours after stores on the strip run by Microsoft Corp. and designer Michael Kors suffered damage. The once bustling avenue turned nearly deserted at times.
“Some days it’s like the countryside,” said Shiqi Ding, who lives and works in Midtown Manhattan.
That new reality has caused some property owners to become more amenable to lower rents and more flexible terms. Average ground-floor asking rents are back to roughly 2013 levels at $2,575 a square foot a year in the fourth quarter. This is down from a peak of $3,123 recorded during the first quarter of 2017, according to brokerage firm Cushman & Wakefield.
“There’s obviously been a shift in landlords’ expectations,” said Steve Soutendijk, executive managing director at Cushman & Wakefield.
Overall availability rate, reflecting vacancies and expiring leases that haven’t been filled, reached 23% in the fourth quarter, though that was down from 27% a year earlier.
Not all retailers are bullish about their prospects on Fifth Avenue. Italy’s Valentino SpA is suing to terminate a roughly $19 million-a-year lease of a store two blocks south of Trump Tower.
Valentino’s four-story shop is now boarded up with a sign directing customers to its Madison Avenue location instead. “The Covid-19 pandemic has undermined and frustrated Valentino’s principal purpose in entering into and continuing with the lease,” according to court filings by the retailer’s lawyer. The landlord has filed a motion to dismiss the suit.
Property owners in previous years jacked up rents on lower Fifth Avenue, hoping to extend the retail strip’s high-gloss image farther south. The part around the Flatiron district still looks troubled, blighted by empty storefronts and subject to falling asking rents.
Still, some retailers on prime Fifth Avenue say they are staying put. Tiffany is renovating its flagship store next to Trump Tower that would include the Blue Box Cafe. The new store is slated to open in 2022, and in the meantime, shoppers can visit its temporary store nearby.
Cho Cho Cheng, founder of the women’s designer label Chocheng, opened a boutique on Fifth Avenue location in late 2019. He had to close his doors a few months later because of the pandemic.
“It has certainly been difficult and challenging to keep the business afloat,” he said. But in a hopeful sign, he added, he has decided against terminating the lease.
“We have decided to keep the store,” Mr. Cheng said. “We hope it will all work out in the end, and we believe it is worth the effort.”