Seems as if the best bargains in Fifth Avenue stores are for the retailers themselves.
Fast-fashion merchant Mango scored an over 80% discount on the rent for its U.S. flagship store at 711 Fifth Ave. when it subleased space from Ralph Lauren, bond-rating firm KBRA said in a report this month.
Barcelona-based Mango’s massive markdown isn’t unusual on the pricey shopping corridor. Skims, the shapewear retailer founded by Kim Kardashian, this year secured a 75% discount for the space at 647 Fifth Ave. that used to be occupied by Donatella Versace’s emporium. In May, Club Monaco signed an extension for space at 597 Fifth Ave. at an 80% discount to the prepandemic rate for the area.
The heavily discounted leases contrast starkly with the stunning purchase prices paid by retailers for buildings only a few blocks north.
Earlier this year, Gucci’s owner paid $963 million to acquire 717 Fifth Ave.; in December, Prada acquired 720 and 724 Fifth Ave. for $822 million. Rolex is developing a new headquarters building at 665 Fifth Ave., and LVMH Moët Hennessy Louis Vuitton plans to raze and rebuild its flagship Vuitton store at 1 E. 57th St.
“It’s clear that well-capitalized tenants are willing to pay for the right space that they want to call home for the long run,” said Evercore ISI analyst Steve Sakwa after the Gucci deal was announced.
But for smaller retailers willing to rent, there are plenty of options. The availability rate on Fifth Avenue between 49th and 60th streets is 17%, according to Cushman & Wakefield. Asking rents fell 4% in the past year and are 10% lower than in 2019.
Retailers are using their bargaining power to negotiate rents that would have been unimaginable not long ago. Earlier this year, Skims agreed to lease space near E. 52nd Street for less than $200 per square, far below the $770 a square foot paid by Versace.
Mango struck its deal two years ago to move into 711 Fifth Ave., an 18-story, 350,000-square-foot building developed in 1927 and acquired in 2019, for $955 million by investor Michael Shvo. Tenants include Swatch and CORE, a members-only club.
Ralph Lauren had vacated its space facing Fifth Avenue in 2017 while continuing to operate the Polo Bar around the corner on East 55th Street. Mango subleased more than half of Lauren’s 50,000 square feet for less than 20% of the rent due under the master lease, KBRA said in a report last week. Lauren paid more than $700 per square foot, according to a 2020 report from KBRA, below the area’s average retail rent at the time of $1,072 per square foot.
Neither Ralph Lauren, Mango, nor Shvo returned requests for comment.
Mango generated more than $3 billion sales last year and has nearly 2,700 stores globally. It plans to open a location in Hudson Yards this month recently opened stores in Boston and Washington, D.C., with plans to operate 40 in the U.S. this year.
The only bad news is its great rent deal at 711 Fifth won’t last. The lease expires in 2029.
Aaron Elstein , 2024-06-11 19:43:44
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