New York City’s Fifth Avenue, typically one of the world’s most popular destinations for shopping, has suffered greatly during the COVID-19 pandemic, leaving landlords looking for about $200 million in unpaid rent from tenants.
Bloomberg notes that landlords along a roughly 20-block stretch on Fifth Avenue, who have already begun offering steep discounts on leases, are currently embroiled in a legal battle over missed rent payments, but this could lead to some high-profile exits and even more vacancies to fill.
“The numbers are big,” Tom Mullaney, a managing director at the brokerage Jones Lang LaSalle Inc., told Bloomberg. “If some of the tenants are financially stressed and they lose, it’ll be very painful. Conversely, if some of the landlords are overleveraged and have cash flow issues, it can be traumatic for them too.”
New York City’s marketing organization, NYC & Co., reports that tourism to the city has dropped by about two-thirds compared to before the pandemic. The National Basketball League alone accounts for more than $8 million in unpaid rent payments on its three-story store on Fifth Avenue, according to an attorney for the landlord, Moinian Group.
The fashion company Valentino abandoned its four floors at 693 Fifth Avenue, asking a court to release them from their lease, which still has eight years remaining. The judge ruled against Valentino, but they have appealed to decision. The fashion company, which is based in Italy, now faces a counter suit from the landlord seeking $207 million to cover both the lease payments and damage done to the Venetian terrazzo marble panels at the store’s location.
Simeon Siegel, a BMO Capital Markets analyst, told Bloomberg that many of the street’s most well-known stores, including Bergdorf Goodman, Tiffany & Co. and the Plaza Hotel could leave due to the effects of the pandemic.
“They will likely never be what they’ve been before,” Siegel said, referring to the street’s most famous shops. “But at the end of the day, they’re still one of the best ways to reach people — if people are there.”
Landlords have already cut asking rents, which have gone down by about 20% in some parts of the city, but many empty storefronts still remain on the street, and at least three leases will expire soon. Giorgio Armani, Abercrombie & Fitch, and Tiffany could all leave the street by mid-2022. Representatives for those companies all declined to comment to Bloomberg.
However, some new stores will be opening on Fifth Avenue, including the Spanish chain Mango and the luxury jeweler Harry Winston.
“There’s way too many people trying to exit or sublease space, and not too many tenants that are interested,” Mullaney said. “And tenants that are interested are looking at rates that give landlords heart attacks. I don’t think it’s a good time to be a landlord right now.”
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