WORLD PROPERTY CHANNEL ®

(NEW YORK, NY) -- Hard times have hit Madison Avenue, that luxury retail strip stretching about a mile and a half from 57th Street to 86th Street in Manhattan.

Gone are about 28 stores, according to a recent informal survey by Vault.com, a career website.  Vacancy is about 12 percent and expected to grow, notes Cushman & Wakefield.

Closed are Petrou, an evening wear merchant; Allegra Hicks, a British designer; Italian clothiers Alessandro dell'Acqua and Luca Luca; and Oilily, a children's clothing shop based in The Netherlands.

Still around, however, are global names such as Chanel, Dior, Valentino, Giorgio Armani, Hermes and Ralph Lauren.

Christopher DeCrosta

Christopher DeCrosta, vice president of Chicago-based Madison Retail Group, is not surprised by the empty stores.

"The vacancy rate on Madison Avenue is certainly among the highest and most noticeable in the city, but it does not come as much of a surprise to those familiar with this market," DeCrosta says.

Rents over the past five years have grown at "an alarming rate," he points out. 'Other than Fifth Avenue, Madison was the first retail strip in New York to break the $1,000 per square foot barrier."

"Once it did, it quickly became $1,500 per square foot and until the recent downturn, asking rents exceeded $2,000 per square foot."

He says, "The fact that space did not sit on the market for very long emboldened landlords to continue to charge such astronomical rents.

"International luxury brands or jewelry retailers quickly snatched up the space and, in many cases, the high rent numbers were absorbed in part by their large marketing budgets." Years ago Madison Avenue was the only destination for luxury shopping in Manhattan, DeCrosta recalls.

"Much of the rest of Manhattan has changed while the Madison rents skyrocketed," he says. "Neighborhoods like SoHo and The Meatpacking District became viable alternatives for high-end retail.

"Retailers like Moschino, who only require one Manhattan location, opted to move to West 14th Street for a fraction of the cost that would have been required to renew on Madison.
"These newer neighborhoods offer brands the ability to appeal to a younger, hipper crowd - one that might reject Madison Avenue's perceived stodginess."

DeCrosta adds, "The real victims of the Madison Avenue collapse have been the smaller and local brands.

"Forced to renew at rents three and four times what they had been historically paying, many tenants have found themselves underwater and unable to stay afloat."

However, he says, "There is a positive side of all this turmoil. Once rents correct and stabilize at a lower number, it will allow these smaller retailers to return to the market.

"Not only will this relief be good for the retailers, it will add diversity and charm to Madison Avenue and once again make it one of the world's most unique shopping destinations."

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