NYC's Fifth Avenue Has Record Empty Space as Rents Seen Too High

The rise of empty storefronts isn't limited to Fifth Avenue. It's part of a Manhattan-wide space glut as retailers -- buffeted by e-commerce, tepid demand for luxury goods and a strong dollar that's eroded tourist spending -- push back against rents that have soared to records....

"Property trades are being based on achieving ever-higher rents, and nobody ever really looks at what retailers can afford to pay," Hodos said. "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."

Retailers are being squeezed across the U.S. In 2016, malls and other types of shopping venues have been hit by 280 major-brand store closures, totaling 12.8 million square feet (1.2 million square meters), data from Reis Inc. show. Another real estate research firm, Green Street Advisors LLC, estimates that several hundred malls around the country will cease operations over the next decade.''

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On the stretch of Fifth Avenue from 49th to 60th streets, which commands the world's highest rents, landlords are asking an average of $3,213 a square foot, up from $2,075 a square foot in 2011, Cushman data show. In the tourist-heavy Times Square area, rents stand at $2,104 a square foot after tripling over a four-year period.

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Buyers of real estate during the recent boom years may not have much room to maneuver. To justify paying record prices for buildings -- and the debt that financed the acquisitions -- owners are under pressure to get the highest rents possible, according to Patrick Smith, a vice chairman of the retail brokerage at Jones Lang LaSalle Inc.

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Landlords who hold out for the right tenant can be left hanging on to empty space for years. A partnership of developer Thor Equities and General Growth Properties Inc., the second-largest owner of U.S. malls, bought 530 Fifth Ave in 2014... No new retail leases have been signed at the property since the acquisition, though three tenants are close to agreements, according to a person with knowledge of the plans...