Prada and Gucci Are Done Paying Monthly Rent, But You Still Have To Pay
New York’s Fifth Avenue is lined with flagship stores of high-end brands such as Cartier, Bergdorf Goodman, Gucci, and other well-known luxury brands that cater to the city’s elite and wealthy shoppers. While it’s world-renowned as the place to shop, it’s also known for sky-high rents, and brands have had enough of price gouging to stay in their well-known address. Retailers are done paying rent, and a few have come up with their solution — buy out their landlord.
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According to the Wall Street Journal, rent on upper Fifth Avenue averaged $2,000 a square foot,-13% higher than the Via Montenapoleone in Milan, the world’s next-most expensive shopping destination.
Prada, one of the brands tired of paying skyrocketing rent prices, is shelling out big bucks to buy the building that houses its Fifth Avenue store in addition to the building next door for more than $800 million. And Gucci is also following the trend. According to the WSJ, its parent company, Kering, is paying almost $1 billion for a 115,000-square-foot retail space located a few blocks south.
“The rents that the luxury retailers were paying on Fifth and in other prime locations were simply astronomical,” Eric Menkes, co-chair of leasing for the New York-based law firm Adler & Stachenfeld, told the outlet. “There comes a point in time when these retailers looked in the mirror and said, ‘Why am I making my landlord rich?'”
Brands are making an expensive statement, and with so many experiencing a surge in sales, such as Louis Vuitton, Dior, and Celine, now is a good time to buy.
“The premium luxury groups have so much cash on their balance sheet,” Eric Le Goff, vice chairman and head of luxury for the retail brokerage by Mona, told WSJ. “For companies not contemplating acquisitions, “why not deploy the cash into real estate where you know you’re going to be there, hopefully for the next 100 years?”
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This article originally appeared on GOBankingRates.com: Prada and Gucci Are Done Paying Monthly Rent, But You Still Have To Pay
