Sky High Rent at NYC's Fifth Avenue Sees Record Empty Spaces

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Sky-high rent has left a startling number of empty retail spaces along New York City’s Fifth Avenue. According to Cushman & Wakefield’s third-quarter report on Manhattan real estate, availability across the borough has risen to 15.9 percent in the third quarter as more luxury retailers pull out, which compares to the previous year’s 10 percent. This year’s steady climb has even surpassed a previous peak of 11.3 percent set in the fourth quarter of 2014.

Fifth Avenue, often considered one of the world’s best and most expensive shopping streets, isn’t the only borough plagued with the upsurge of empty storefronts. The space surplus is prevalent across Manhattan as retailers reject soaring rents that have reached a record high. Are other factors at play includes a softening demand for luxury goods and a stronger dollar that has discouraged tourist spending.

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“Property trades are being based on achieving ever-higher rents, and nobody ever really looks at what retailers can afford to pay,” said Richard Hodos, Vice Chairman at CBRE Group Inc to Bloomberg.

 Indeed, Hobos adds how increasing leasing costs are in line with rising property values within the past five years, exceeding gains in merchandise sales. As such, running profitable stores at a string of locations becomes virtually impossible.

“In some cases, rents need to come down 30 percent or more for rents to be at levels where retailers are able to make sense of them again,” he adds.

New stores are reportedly becoming available on a daily basis, leaving an increasing oversupply and cheaper rents in many places. Furthermore, the increasing popularity of ecommerce and online shopping has seen fewer people walking into physical stores to shop.

Despite so, Cushman & Wakefield believes that Manhattan’s retail market will still enjoy a strong outlook, supported by tourism and consumer spending to one of the most iconic boroughs in the world.

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