We had forecast this would happen long before the nationwide lockdowns began in March. And now, a bad situation is turning much worse.
In “Ghost Town” New York City, average asking rents along 16 major retail shopping strips in Manhattan slid in 2020’s second quarter, the 11th consecutive quarter rents have fallen.
Rents in these areas slipped an average of 11.3 percent year-on-year to $688 per square foot, the first time since 2011 that rents have averaged below $700, according to CBRE, a real estate services firm.
Along the 16 corridors, 235 storefronts are vacant, passing 2013’s record of 230.
The priciest square footage lies along Fifth Avenue’s Plaza District, reaching from 49th to 59th Streets and studded by the likes of Cartier, Gucci, and Tiffany & Co. Rents there have held firm from this year’s first quarter at the same $3,000 per square foot but are 4.8 percent below prices a year earlier.
Madison Avenue from 57th Street to 72nd Street, home to boutiques belonging to Balenciaga, Celine, and Hermès, saw rents edge down to $882, 15.3 percent below the same period in the previous year.
Storefronts on SoHo’s Prince Street fell furthest, dropping more than a third from $699 a year ago to $437 per square foot now, a 37-percent crash that has brought rents below $500 for the first time since 2014.
Tourists, the key market for luxury retailers, have been absent for months, leaving stores with little cash flow to pay stratospheric lease costs. Even native New Yorkers spent weeks hunkered at home instead of strolling and shopping.
“In the U.S., you will see that what was once perceived as a luxury block in any major city is no longer exclusively luxury,” said Naveen Jaggi, head of retail advisory services at JLL, a real estate services firm.
On Fifth Avenue, “you see a Vans,” known for skateboard shoes, “a Five Below” discount store, “and a Timberland” outdoor wear outlet. “That’s all you need to know about the direction of Fifth Avenue.”
“We will see an extension of what happened in 2008 and 2009,” he added, “which left American consumers shifting toward value more aggressively.”
Similar scenes of empty storefronts and troubled retailers to the rich can be seen on the “Magnificent Mile” of Chicago’s Michigan Avenue, the Las Vegas Strip, and Rodeo Drive in Los Angeles.
Worldwide, luxury retail sales will drop as much as 29 percent this year, losing $85 to $120 billion compared to 2019, the Boston Consulting Group predicted.
TREND FORECAST: With facts and data, we had forecast the luxury retail slump that hit New York City and which would hit other high-price rental areas was well underway before the lockdowns and COVID Hysteria struck.
It’s all about the bottom line, and the bottom of expensive retail rentals was falling out as wage growth stagnated, the general public sunk deeper into debt, and the wealth was concentrated among the one percent.
And now, with tourism barely existing, strict government regulations imposed that limits businesses and entertainment venues locked down for the foreseeable future, the high-end consumer market sector that can reinvigorate luxury sales is outward bound from densely populated cites… again, as we had forecast in February.
No Business, No Rent
As we have been reporting since March, across the retail spectrum, many retailers have stopped paying rents and are suing to break their leases. Among them is high-end handbag maker Valentino. Renters are also using the economic shutdown as leverage to negotiate lower rents, knowing landlords cannot afford to see properties stand empty.
