In a measure of the plunging value of commercial real estate, fashion influencer Ralph Lauren is entering arbitration with the owners of 711 Fifth Avenue in Manhattan.
Lauren leased the prime, ground-floor retail spot in 2017, agreeing to $27 million in annual rent but since has abandoned the space.
To stanch some of its cash bleeds, Lauren has reached an agreement to sublease the storefront to Mango, the Spanish fast-fashion chain, for $5 million annually. Mango’s business is to mass-produce cheap versions of haute couture.
The partnership that owns the building blocked the sublease, claiming that Mango is not the caliber of tenant that belongs on Fifth Avenue.
Unstated was the owners’ fear of agreeing to rent so low in one of the world’s premier shopping meccas. By green-lighting a rent more than 80 percent below the current lease price of record, the partners could ignite a wave of demands on other property owners along the avenue to slash their asking rents or renegotiate current leases.
“Landlords are loath to contribute to massively discounted market lease comparables,” Michael Glanzberg, a principal at consulting firm Sinvin Real Estate, told Business Insider. “With broad vaccination around the corner” and the prospect of rents edging back up, “no owner wants to [set] COVID-era rents” as a standard.
Fifth Avenue’s asking rents fell from $3,000 per square foot in 2015 to $1,976 in January 2020 and currently to $1,245 for empty retail space at 767 Fifth Avenue, according to Newmark Knight Frank, a real estate services firm.
Last October, elite jeweler Harry Winston renewed its 19,000-square-foot lease at 718 Fifth Avenue and added another 18,000 next door. Those familiar with the lease said that the negotiated rent settled at $437.43 per square foot.
TREND FORECAST: We note this rent war article because it is an example of the worst that is yet to come. As we have long noted, East Side, West Side, FOR RENT signs were all around the town long before the COVID War began and New York City was locked down.
New York and other cities across the nation and around the world that were locked down and were dependent on commuters, tourism, conventions, trade shows, concerts, theaters, etc., will take years to recover… especially as crime rates increase and more people flee to cheaper safe-havens.
