A record-setting Fifth Avenue rent this week adds to the narrative that both New York City and luxury are back. Japanese clothier Uniqlo has reportedly signed the fattest retail lease contract Manhattan's priciest street has ever seen. The company will pay $300 million over 15 years. Is the recession over for Fifth Avenue?
"It's just another reinforcement that retailers have to have a Fifth Avenue presence," said Faith Hope Consolo, chairman of retail leasing, marketing and sales for Manhattan- based Prudential Douglas Elliman Real Estate. "Fifth is going to be their face to the world."
The deal will be the highest aggregate amount paid to lease retail space in New York City, beating Gucci Group NV's $16.5 million in annual rent for about 45,000 square feet at Trump Tower three blocks north, Mendelson said.
The Uniqlo contract weighs in at $20 million per year -- significantly more than Gucci's rent. The Japanese retailer has a significant global presence, though is little known in the U.S. To be sure, this Fifth Avenue store hopes to change that.
So why is Uniqlo paying such a high price for a presence in the U.S. just as the nation begins to come out of a deep recession? Because it must believe the recovery is well underway for both Manhattan and luxury. That looks like a smart bet.
Much of New York City's recent success has to do with the Wall Street bailout, which left its economy in better shape than it would have otherwise been. New York City's labor market has been improving significantly in 2010. From February through March, the city saw its number of unemployed decline by over 15,000 residents. That might not sound like much, but it's more than any other major city listed in the Bureau of Labor Statistics' state report. The city also saw its unemployment rate decline from 10.4% in January to 10.0% in March. That puts its rate lower than that in Chicago, Los Angeles, Detroit, DC, and Miami.
Its residential real estate market has also largely recovered. The Uniqlo contract signals that commercial real estate might be making a comeback as well. Retailers may again be willing to pay up for Manhattan store fronts.
For luxury, the downturn also could be over. Bubble-driven recessions often end with the wealthy recovering first. That's what we're seeing here. The millionaire's club increased its ranks last year. Asset prices, especially the stock market, are improving. That benefits the rich more than the low- and middle-classes. So it should really come as no surprise that luxury retailers are eager to capitalize on the wealthy's rebound. And where better than the on the U.S.'s best known street for luxury in what may be the nation's fastest recovering city?