The Real Deal points out that as of May 2016, the amount of available retail space along Manhattan’s Madison Avenue had been growing. Retailers with financial wherewithal were looking elsewhere.
New owners had bought Madison Avenue properties at record prices. Investors, partners and banks were preventing the new owners from leasing to retailers below certain “pro-forma” numbers. Rents were increasing steeply.
The effect did other than than satisfy investment requirements. As asking rents broke $2,200 per square foot in prime stretches of Madison Avenue, retailers who might otherwise have taken space there were looking for alternative locations.
Retail insiders said some of the buyers who acquired properties over the last year or two at eye-popping prices have their hands tied by investors, partners or banks who won’t let them lease to retailers below certain target amounts or “pro forma” numbers. That, they say, is exacerbating availabilities.
“New owners who bought at record prices that required record rents are less likely to cut pricing because they can’t satisfy their investment returns,” said Jeremy Ezra, a broker at RKF.
But brokers said this slowdown is different from the recession in 2009 and 2010 when retailers did not have the financial wherewithal to make deals. That’s not the case today.
See:
“Madison Avenue retail empties out” | retail spaces on the tony stretch are clearing out as rents get too high and tenants look for cheaper options, Adam Pincus, The Real Deal, 1 May 2016
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