Fight or Flight: High-Profile Stores Flee Fifth Avenue in Manhattan

Fifth Avenue’s flurry of shopping bags, rows of high end stores and swanky people crowding the sidewalks, has lost its luster in recent years. The continuous revolving door has come to a halt. Retailers in "The City That Never Sleeps" are waking up with a hangover brought on by high rent rates on Fifth Avenue. These high rates have many retailers heading for the exits.

Stores still line the avenue, but in recent years, a record number of brands along the upper part of the shopping strip have shuttered or relocated, including Kenneth Cole, Juicy Couture and H&M, according to an analysis for the brokerage firm Cushman & Wakefield. From 49th to 60th Streets, the availability rate of leases, one gauge of turnover, reached 15.9 percent at the end of last year, up from 6.1 percent five years earlier. "The Fifth Avenue model seemed to work for a while, and then it got to a point where it just doesn't work at this price anymore," said Barbara Denham, a senior economist at Reis, a real estate data and analytics firm. "It got to the point where I think landlords were jacking up each new lease with higher and higher rent, and at some point, something had to give."

Landlords along Fifth Avenue have not had much sympathy for the troubles of the retail industry. At the end of last year, the average asking price for a square foot of retail space from 49th to 60th streets was more than $2,900, up from $2,283 at the end of 2012, according to data from Cushman & Wakefield.

Those figures make the area one of the most expensive in a city known for the stratospheric cost of its real estate. Other factors have affected retail prospects in the area too. Foreign tourists, who typically spend more than domestic visitors, have been pinched by the declining value of the euro and the pound.

NYC & Company, the city's tourism and marketing agency, projects that 300,000 fewer international travelers will visit the five boroughs this year. While domestic travel is expected to remain strong, the group has cautioned that it takes four domestic travelers to equal the spending power of one international visitor.

There is another factor affecting what's happening on Fifth Avenue. While the majority of shopping is still done in person, e-commerce has grown faster than brick-and-mortar sales. Across the country, once-mighty chains like Macy's and Sears have had to re-evaluate their physical locations. Department and big-box stores across the country have closed locations. Others have filed bankruptcy, including American Apparel, BCBG Max Azria, RadioShack and, on Tuesday, Payless Shoe Source.

Since mid-2015, major brands have shut down at least 470 locations at an accelerating pace, according to Ms. Denham. Those locations, represented in large part by Sports Authority, Macy's, JC Penney and Kmart add up to about 28.9 million square feet of retail space, she said.

What's happening on Fifth Avenue reflects "the rebalancing of brick-and-mortar and e-commerce that we're experiencing," said Gene Spiegelman, a vice chairman at Cushman & Wakefield.

"Retail sales are still growing," he said. "The question is, where do those sales originate?"

The retail industry faces turmoil, and not even Fifth Avenue, one of the premier shopping strips in the city, has been immune. Retailers may need to drink a fifth of something to stomach the escalating rents of Fifth Avenue.

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