Swiss fashion retailer Akris is known for luxury handbags and $6,000 parkas, but now it’s getting in on New York real estate.
The fashion house purchased a Madison Avenue retail property from SL Green for $40.6 million.
The deal is the latest example of retailers dishing out eight- or nine-figure sums to acquire the properties they inhabit. A few weeks ago, Japanese coffee retailer Geshary paid $38 million for a Fifth Avenue property previously owned by the Riese Organization. Earlier in the year, it was Dyson paying $60 million for a Soho building.
Then Prada took things to a new level, spending $835 million for adjacent Jeff Sutton properties on Fifth Avenue. It shelled out $425 million for 724 Fifth Avenue, which hosts the Milanese-based brand’s flagship store, and $410 million for 720 Fifth (although it was recorded as a $397 million sale).
Retailers buying real estate isn’t new. But the activity has seemingly ticked up in recent years.
“The reason why you’re seeing more retailers buy is partly because there’s less competition from investors,” said CBRE’s Dan Kaplan, who was involved in the Akris, Geshary, and Dyson deals. Less competition means better pricing.
Rent savings and tax benefits are financial incentives for these purchases. With Prada, for instance, yearly rent at its flagship store is $25 million, and that number was likely to climb in the coming years.
Retail rents throughout the city rose last year. But they’re still far below pre-pandemic numbers, according to a Colliers report. Whether that means they have a lot of room to grow or that the declining relevance of brick and mortar stores will keep them down is open to interpretation.
But money isn’t everything, Kaplan said. “Retailers can buy all cash, and they aren’t looking for returns that investors are looking for.”
Rather, owning a building gives a retailer freedom to do what they want with the property. Prada could have been booted from its flagship for years if Sutton decided to renovate, under the terms of their deal and court rulings from a 2019 lawsuit.
If Geshary’s Tokyo store is any indication, the brand could have grand plans for its new location. Buying the building removes a potential barrier to getting the store exactly as Geshary wants it and saves the headache of negotiating leases.
Perhaps most of all, it’s about locking down a location. Not every retailer can find or even afford a top-notch Manhattan storefront, the type that lends a heightened cachet to even the most respected brands. Property owners, like Akris, don’t need to worry about that, so long as they make the mortgage payments.
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What we’re thinking about: While Prada’s plans for 724 Fifth Avenue are clear, its plans for 720 Fifth, which no longer has a retail tenant (Abercrombie & Fitch moved to 668 Fifth), aren’t as obvious. At the very least, the company now has some say in who its neighbors are. What do you think it will do? Send a note to david.westenhaver@therealdeal.com.
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Closing Time
Residential: The priciest residential closing Friday was $20 million for a condo at 685 Fifth Avenue in Midtown.
Commercial: The most expensive commercial closing of the day was $27 million for the former Toby Moskovits development site at 215 Moore Street, Brooklyn.
New to the Market
The priciest residence to hit the market Friday was a townhouse at 119 East 71st Street in Lenox Hill asking $20 million. Modlin Group has the listing.
Breaking Ground
The largest new building filing of the day was for a 4,210 square-foot, two-family house at 1051 Edgegrove Avenue, Staten Island. Valenziano Architecture filed the permit application.
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A thing we’ve learned: Colliers’ retail report was full of interesting tidbits on rent. Chief among them: While asking rents increased throughout the city last year, they rose the most in Times Square — up 25 percent. But Times Square landlords don’t always get what they ask. About 1 in 4 retail spaces there is available, more than double the rate of many neighboring areas.
Elsewhere in New York
— It’s been almost three years since New York State lawmakers legalized marijuana for recreational use. Yet the overwhelming majority of weed shops in NYC are unlicensed. According to The City, just one of the Lower East Side’s 34 recreational dispensaries has a state license. Statewide, there are 43 legal marijuana retailers.
— A few dozen people were injured Thursday when two 1 trains collided at a 96th Street station. The crash occurred when an out-of-service 1 train ran a red light near the station, smashing into a train filled with commuters. The MTA has yet to determine what caused the first train to run the light, Gothamist reports.
— Mayor Eric Adams’ administration sued 17 transportation companies Thursday for carrying 30,000 migrants to New York under the direction of Texas Gov. Greg Abbott. The city is looking for $700 million in damages from those companies, the New York Times said. The lawsuits are the latest in a longstanding feud between Adams and Abbott about immigrants.