Luxury Retail Brands Have Been Spending Big On Real Estate 

Luxury retail brands like Prada have been spending large amounts to purchase real estate spaces in New York.

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Many luxury retail brands have been investing in real estate properties in New York. For example, Swiss fashion retailer Akris recently purchased a Madison Avenue retail property for $40.6 million. 

This is just one example of retailers spending eight or nine-figures to acquire real estate properties in the city. According to The Real Deal magazine, Geshary, a Japanese coffee retailer, recently bought a Fifth Avenue property for $38 million and Dyson paid $60 million for a property in Soho. 

One of the largest transactions, however, came from luxury brand Prada, which recently acquired two properties on Fifth Avenue for a total of $835 million. They purchased 724 Fifth Avenue for $425 million, and 720 Fifth Avenue for $410 million. Dan Kaplan, who works for CBRE, a global commercial real estate service, gave his reasoning behind this recent uptick in luxury retail brands investing in these new properties. 

“The reason why you’re seeing more retailers buy is partly because there’s less competition from investors.”

Kaplan was also involved in the real estate deals for Akris, Geshary, and Dyson, and stated that less competition from investors means there’s better prices available. 

These purchases are also financially incentivized by savings on rent prices and tax benefits that come from purchasing these retail spaces. The Real Deal reported that with Prada, for instance, the 724 Fifth Avenue location which will be their flagship store has a yearly rent of $25 million, a sum that was likely to climb in the coming years. 

Overall rent for retail spaces throughout NYC increased last year. According to a report from Colliers, another Global Commercial Real Estate Services, retail rent pricing is still far below pre-pandemic numbers. The pricing, however, isn’t what these luxury brands are focusing on with these purchases, according to Kaplan.

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“Retailers can buy all cash, and they aren’t looking for returns that investors are looking for.”

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With these luxury brands owning the buildings, they have a lot more freedom when it comes to what they want to do with the space itself. If one is just renting a space, they’re more constricted in the structural and design changes they want to make, which is a crucial distinction especially for retail spaces. 

Geshary, for example, is known for its setting and atmosphere at its Tokyo location, which means they likely have big plans for their space in NYC. Buying the building itself removes a lot of boundaries the brand would otherwise have to go through to make the renovations they want, like negotiating their lease and acquiring certain permits from the city itself. 

The reason we’re also seeing luxury brands acquire these spaces is because in Manhattan especially, locking down a location that a brand can actually afford can seem impossible. For successful brands bringing in thousands upon millions of dollars monthly, they don’t have to worry about making their payments as much as other smaller brands.