New York commands 5 billion euros in luxury street rents

New York remains the top destination for international fashion and luxury. The American metropolis reigns supreme in the commercial real estate market with sky-high rents, the highest in the world, and annual rental values that are double those of Paris and four times those of Italy.

The undisputed star is Fifth Avenue, which has been in the spotlight due to recent multimillion-dollar acquisitions of trophy assets by top luxury brands. According to estimates from Scenari immobiliari for MFF, Manhattan’s iconic shopping street retains its title as the world’s most expensive retail street. Rents in the prime upper section (between 42nd and 60th Streets) reach 24,300 euros per square meter annually, amounting to nearly 1.4 billion euros in retail rents. Along with other prestigious New York avenues like Madison Avenue (bringing in 435 million euros) and the prime areas of SoHo (exceeding 1.2 billion euros), the total annual rents exceed 3 billion euros. Including the city’s secondary streets, this figure approaches 5 billion euros, far surpassing Europe’s fashion capitals.

“New York is unequivocally the most desirable and attractive city for both retailers and consumers, with Fifth Avenue being an icon of luxury, fashion, and success. This has a clear positive impact on real estate retail, a market that here demonstrates strong resilience and adaptability to the economic environment. 2023 saw further improvements over the post-Covid period of 2022, with a gradual increase in rents and the lowest vacancy rates in the past 10 years,” Francesca Zirnstein, Director General of Scenari Immobiliari, told MFF.

“On the one hand, this city hosts the highest number of headquarters and luxury fashion retailers, and on the other, it offers consumers the widest range of commercial activities, shopping experiences, and formats, from department stores to boutiques. It covers everything from luxury to fast fashion, including vintage, second-hand, and local businesses, along with exceptional dining options. Additionally, over 300 e-commerce startups frequently open temporary spaces to physically test their businesses. In short, it is a city of immense appeal, always at the forefront and ready for experimentation,” Francesca Zirnstein added.

As Scenari immobiliari highlights, the geography of New York’s commercial real estate is unique, often focusing on hot zones or blocks rather than entire streets due to their considerable length and varied layout. Upper Fifth Avenue, for example, stretches 1.5 kilometers and boasts 90,000 square meters of retail space, making it the most coveted location for stores. On Madison Avenue, where rents reach 12,350 euros per square meter per year, the most sought-after section extends from 57th to 72nd Street (1.2 kilometers with 50,000 square meters of retail space). SoHo also stands out, with key areas including Broadway, West Broadway, Prince Street, and Lafayette Street between Houston Street, Canal Street, and Sixth Avenue, where rents peak at 13,500 euros per square meter annually, covering 3.1 kilometers with a total of 150,000 square meters of retail space.

Overall, New York’s high streets extend for a total of 5.8 kilometers, with 290,000 square meters of retail space. Including secondary streets, this totals 13.8 kilometers with nearly 600,000 square meters of commercial space. “2023 started well for the retail sector, thanks to favorable post-Covid lease conditions that allowed brands that previously could not afford it to enter the market. Therefore, the availability of spaces diminished over the year, driving a gradual increase in rents. The average rent now ranges between 7,800 and 8,000 euros per square meter per year, a 10% increase from 2022. However, this is still 40% lower than the peak of around 13,000 euros in 2014, the golden period of the New York market,” Federico Rivolta, Head of Feasibility Studies and Special Projects at Scenari immobiliari, explained.

“This year, the trend will remain positive, but predictably slower than in 2023 and especially 2022, with retail rent growth projected between 5% and 8%,” Federico Rivolta continued. He explained that “the retail market is facing a less attractive supply of real estate opportunities and excessively high prices. Finding a location on Fifth Avenue, Madison Avenue, or in SoHo is extremely challenging, as these are among the most coveted addresses with very limited availability. Additionally, there are numerous construction projects with high renovation costs and delayed completion times. Moreover, the 2024 US elections could introduce fluctuations in consumer spending and market confidence. Despite these challenges, the sector remains a key reference point, driven by fashion, luxury, and food”.

Secondary streets also play a significant role in New York’s retail landscape, with prices being particularly volatile, according to Scenari Immobiliari. The most expensive streets for renting a retail space include Bleecker Street, between Sixth and Eighth Avenues, with maximum rents of 11,700 euros, and West 12th Street, between West Street and Sixth Avenue (11,250 euros). In the Lower East Side, Canal Street and Grand Street command rents of 8,750 euros, while Orchard Street, Ludlow Street, and Essex Street see rents of 7,250 euros. In Little Italy, key streets such as Mott, Mulberry, and Elizabeth have rents of around 8,250 euros.

Showrooms are also highly sought after by international brands for debuts, renovations, and relocations, given New York’s appeal in fashion and luxury. The top addresses for showrooms remain Fifth Avenue, Madison Avenue, and SoHo. It is no surprise that Fifth Avenue, the most desirable street, is the focus of multimillion-dollar trophy asset acquisitions. Recently, Prada group paid over 390 million euros for the building at 724 Fifth Avenue, the historic location of its flagship store, while Kering spent around 885 million euros for a building at 715-717 Fifth Avenue. The future of the building at 745 Fifth Avenue remains uncertain, with Chanel and LVMH both showing interest. (All rights reserved)

Gruppo Inditex corre nel Q1 2024: ricavi a 8,2 mld euro