https://www.afr.com/property/commerc...0240212-p5f4cp
The two Fifth Avenue blocks leading New York’s retail revival
Natalie Wong and Angelina Rascouet
Feb 14, 2024
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“New York City is dead forever.” In the bleak summer of 2020, that headline ripped through a pandemic-alerted reality and touched a nerve.
Jerry Seinfeld offered a rebuttal, saying, “Oh, shut up.” More than three years later, he is being vindicated. And nowhere is that vindication more evident than a two-block stretch of New York’s Fifth Avenue.
In that key Manhattan shopping corridor, the world’s biggest luxury brands are outdoing each other to score the best spots. Gucci’s parent and Prada-tied entities have raced to buy properties on the stretch from 58th to 56th street over the past two months for almost $US2 billion ($3.1 billion) combined. Louis Vuitton’s parent company, meanwhile, is looking at 745 Fifth, another corner spot just steps from the Plaza Hotel and Central Park, and near the gleaming condo towers on Billionaires’ Row.
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New York’s luxury market was also in the doldrums as the pandemic walloped shopping corridors in the city and travel and tourism dried up.
But the sudden surge of interest from the luxury brands in recent months shows the rapid recovery for a lofty segment of Manhattan’s retail real estate.
The luxury conglomerates, backed by billionaire families with long-term horizons and coming off a post-pandemic boom, are seizing a moment – both in New York and globally – at a time when many traditional real estate investors have been sidelined as rates surged.
“These are tenants that are iconic, enmeshed and entrenched in these particular pockets” of New York, said Michael Marks, an executive director at Cushman & Wakefield. “They’ve been there, or envision themselves being there, for decades to come and this gives them an opportunity to control their destiny, to minimise rent fluctuation or spikes.”
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The recent purchases have been a way for a handful of luxury billionaires to put their stamp on the area. Bernard Arnault, chief executive officer of LVMH Moet Hennessy Louis Vuitton SE, is the world’s third-richest person with a fortune estimated at $US185 billion, while Miuccia Prada Bianchi and her husband Patrizio Bertelli, Prada SpA’s chairman, have fortunes estimated at about $US6 billion each, according to the Bloomberg Billionaires Index. François Pinault, Kering SA’s founder, is worth $US34 billion. His son François -Henri Pinault is chief executive officer of the Gucci owner.
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When the prime spots became available, the luxury companies moved quickly. The two Prada purchases – of 720 and 724 Fifth for a total of $US835 million – were completed in less than 20 days in December, where transactions of such size normally take months, according to people familiar with the matter, asking not to be identified discussing private details. Kering’s $US963 million deal for 715-717 Fifth closed in about a month, the people said.
Billionaire Jeff Sutton, who owns retail properties throughout New York, was the seller behind those deals.
While the properties are on a prime shopping corridor in Manhattan, they have not been free of hassle in recent years as battles with lenders and Prada as a tenant have cropped up.
Still, the Prada building transactions mark a solid gain for its owners. The sale of 724 and 720 Fifth at $US425 million and $US410 million, respectively, was far above the $US223 million and $US153 million Sutton and partner SL Green Realty paid for the buildings more than a decade ago, public records show. SL Green sold its stake in the Prada buildings to Sutton a few years ago, but still held a minority stake in the Kering ones.
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New York, for its part, has already seen the benefit of LVMH’s investments.
The conglomerate previously cemented its status on Fifth Avenue with the redevelopment of a huge location for jeweller Tiffany & Co in a building at the corner of 57th Street. When the flagship store – among the largest in the company’s entire 75-brand portfolio – reopened in April, it had “a ripple effect,” said Marie Boster, president of the Fifth Avenue Association.
“Stores reported to us that they saw sales that weekend that were unprecedented,” Ms Boster said. “Investments are working, and that’s contributing to the momentum in interest that we’re seeing on Fifth Avenue.”
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With most of the prized corners on upper Fifth Avenue claimed, demand likely will spread to other prestigious retail submarkets in New York, according to Cushman’s Marks. Places such as Madison Avenue are seeing a resurgence after being decimated by the pandemic and the broader rise of e-commerce. SoHo is also drawing more interest, from contemporary and high-end labels as well as restaurants.
Top brands “are seeking great locations and they’re becoming harder and harder to find,” said Mark Masinter, chairman of global retail at Newmark Group. “While Fifth Avenue specifically around this specific grouping of acquisitions is a very interesting story, the broader story is the rebound of New York City.”
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NEW YORK is Back!
“Office buildings are our factories – whether for tech, creative or traditional industries we must continue to grow our modern factories to create new jobs,” said United States Senator Chuck Schumer.
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