New York’s Fifth Avenue is under fire
You know when you ask a 13-year-old comic book fan about the X-Men? That’s what Gene Spiegelman, vice president of retail services for North America at Cushman & Wakefield, a real estate services company, is like about Fifth Avenue.
“We could walk down the street all day long and I could tell you a story about every space, every building. How Abercrombie & Fitch used to be Fendi,” he said.
Even Spiegelman’s personal life is focused on Fifth.
“I did the first lease for Prada. That used to be the B. Dalton Booksellers store. And from the commission I earned on that transaction, I bought my wife her engagement ring,” he said. “That was my first large deal in Manhattan on Fifth Avenue. And that’s a true story.”
Another true story — the deals here are big. Spiegelman said the average price is $3,200 a square foot. But according to data from Cushman & Wakefield, if you walk just one avenue away to Madison, also lined with luxury brands, average rents dips by 60 percent. But retailers are willing to pay for Fifth because of a love story — tourists love Fifth Avenue.
Lately though, Fifth Avenue has become even more popular. Home to the president-elect, a string of politicians have been making their way in and out of Trump Tower. There’s also the protesters. The Rockefeller Christmas tree is about to be lit. And all of this has meant that traffic has slowed to a trickle. And there’s a lot of it. This stretch of sidewalk is home to some of the most popular shopping stores in the world, like Tiffany’s and Saks Fifth Avenue. It’s also home to some of the most expensive retail real estate in the world. And lately, some empty storefronts have popped up on the iconic stretch. Rents are high, but the story is more complicated than just rent.
Just ask tourists Chris Tuite and Jay Holden. They’re standing down the block, across the street from the iconic Tiffany’s. Holden said she loves the film “Breakfast at Tiffany’s,” but this morning the couple had another reason for their visit. “We actually just literally got engaged. So I pointed out some rings that I like for him,” she said.
But she notes, Tiffany is a spot for browsing, not buying. “Probably not. It’s more a case of coming to see it, rather than actually shopping in there.”
At many of the fancy stores, said her new fiance, Tuite, the mood is the same. “We were in the Apple store there and I said it feels more like a museum. No one was actually buying anything. They were just walking around looking at stuff.”
But for some brands, being on Fifth Avenue isn’t about selling in that store.
“Many retail companies need to have a presence on Fifth to showcase their product. It’s not always related to occupancy costs,” said Robert Futterman, chairman and CEO of RKF, a retail leasing company.
For a store, he noted, having a presence on Fifth Avenue can be a marketing move.
“Microsoft would be very happy if you spent 45 minutes in their store, browsing around, and then ordered their product on the internet,” he said.
Go back in history. Bergdorf Goodman and Saks Fifth Avenue were anchor stores.
“So Tiffany’s had to be there. Cartier had to be there,” said Futterman. “If you want to look at more recent times, Ralph Lauren felt he had to be there. And everybody has followed suit.”
For brands, Fifth Avenue has become a real estate party. But the kind where you have to make an appearance. “It’s monopoly for billionaires,” Futterman said.
But today the game is changing. With a vacancy rate of about 15 percent, up from 10 percent a year ago, there are some empty storefronts on Fifth Avenue.
“It used to be that fashion dictated. Now, fashion listens a lot,” said Syama Meagher, CEO of Scaling Retail, a retail consulting firm. Especially, she noted, to consumers who increasingly want to shop locally — often close to home where it’s convenient.
“People are shopping more on mobile. People are shopping more on e-commerce. People are walking into stores, looking at products” she said. “Looking at them on their phones. Saving them and buying them later.”
Fifth Avenue, noted Meagher, remains an international retail destination. “When people come to New York they want to come shopping on Fifth Avenue,” she said. It’s just that they don’t always want to carry bags on the subway, or, to pay local sales tax.
So, Meagher said, the big brands she works have taken note.
“Because of that the conversations have really shifted from, ‘Hey, we’re this big, shiny store, you need to come to us,’ to ‘Hey, you’re our big, shiny customer, we need to come to you.’”
Meagher said the tiniest breeze of questioning about the need to pay the high rents Fifth Avenue is beginning to blow. “I’m hearing a little bit more of do we need to do this? It’s not one of those things where it’s a no, we’re not going to do this quite yet,” she said, “But it’s definitely more of, what are our other options?”
Something unthinkable not to long ago. Another change, said Spiegelman, thanks to e-commerce, competition can now come from within a company. So Spiegelman said you may end up fighting your own co-workers for the allocation of resources like a budget that covers the rent on a flagship store on Fifth Avenue.
“For instance if you’re within a company, and I’m the president of e-commerce and you’re the president of traditional brick and mortar retailing I think there’s a little competition there to see who’s going to drive more sales, and, at what level of profitability,” he said. “Who’s going to open up more new customer channels?”
But, he said, don’t let the numbers fool you. This stretch of Fifth Avenue is tiny. So, if just two or three stores are empty it can look big statistically. But just like a Tiffany or Cartier setting, the neighborhood is a classic.
This piece has been updated to include more details.
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