Brian Zak/NY Post
Prime city retail storefronts are so rare that businesses are opting for the nuclear option — buying.
Kering and Prada bought their stores on Fifth Avenue last year for $835 million and $963 million respectively. Now, Uniqlo is purchasing 100,000 square feet of retail it already occupies at 660 Fifth Ave. from Vornado.
Uniqlo bought one 17,250-square-foot portion of the retail condo, for $350 million. The deal prices the space at $20,237 per foot — and gives them a forever home.
“Smart retailers are saying before the rent gets out of control again, let me own it,” said Steven Soutendijk of Cushman & Wakefield. “We have the lowest availability since 2011 or 2012.”
In the base of the new Mandarin Oriental Residences at 685 Fifth Ave., brokers at Newmark have been marketing spaces occupied by Coach, Stuart Weitzman and Tag Heuer on behalf of owner Brookfield. Other brokers suggest since LVMH is seeking spaces on Fifth Avenue, it could make an offer.
“The big fashion houses want the guarantee that they will have a fantastic presence on a great corner in perpetuity,” said Matt Chmielecki of CBRE.
It’s a similar story downtown where Adelaide Polsinelli of Compass has two restaurants and some streetwear brands that want to buy locations in Little Italy and Soho. “Space is limited in Soho and prices are going up,” she said.
Investor Isak Andic’s company bought a 19,000-square-foot store occupied by Cotton On at 512 Broadway (56 Crosby St.) for $26.9 million. Nearby, at 597 Broadway (170 Mercer St.), the Jackson Group paid $6.25 million for a store. Meanwhile, skin care brand Caudalie spent $9.7 million to buy a vacant store at 130 Greene St.
But Ikea’s parent company is truly DIYing it: Not only is it buying 70,000 square feet — that will likely house a store — in the base of Extell’s new office tower at 570 Fifth Ave. at W. 47th St., it’s also investing in the project.
“Investors want to have the ability to collect income from tenants and not just have a vacant space.”
Bernadette Brennan, Serhant Commercial
“It’s a very strong signal that retailers are sending to New York and the market by committing to New York and spending so much capital to control their real estate,” said Soutendijk.
But it’s not just big fish gobbling up spaces. Smaller retailers are also buying.
Bernadette Brennan, of Serhant Commercial, sold two small retail condos in the base of a new residential building at 165 Lexington Ave. on the corner of East 30th Street for nearly $1,400 per foot to owner-users. She has one left to go. “Both were sold to the owners of small businesses who wanted to own instead of lease,” Brennan said. “We are seeing a desire for ownership.”
Along with not paying “the exorbitant retail rents in Manhattan,” there are also tax advantages to ownership, Brennan said. One of the retail condo buyers had sold another property and used the federal 1031 tax-free exchange proceeds to plow into the new store.
Religious groups, childcare companies, other non-profits and private schools, which don’t pay real estate taxes, are also in a stronger position to buy space, said Polsinelli.
“I have one on the market where the taxes were through the roof and two non-profit users want it,” said Polsinelli of Compass. “They can pay more because they don’t have to factor in the real estate taxes.”
But the retail buying spree isn’t only being spurred by owner-users.
Investors are driving sales of occupied spaces, too. “Investors want to have the ability to collect income from tenants and not just have a vacant space,” Brennan said.