Madison Avenue Adapts Amid Vacancies and Consumer Spending Shifts

There's still a silver lining to Madison Avenue, even with shopper traffic down, record vacancies and luxury brands banking on e-commerce while curtailing brick-and-mortar growth.America's most famous high street has a built-in local clientele that makes the avenue less dependent on tourist shopping, which has fallen nationwide. Events and activities organized by the Madison Avenue Business Improvement District geared to drum up traffic and bring greater cohesion to the community are growing in number. Madison is clean and well-policed, and some retailers, such as Golden Goose and Stella McCartney, associated as "downtown" brands with locations in SoHo or lower Manhattan have or are moving on Madison Avenue, adding a different dimension in terms of goods, services and appeal.Madison Avenue, north from 57th Street, does appear pockmarked with vacancies. There's one on almost every block either on the west side or east side of the avenue, casting an appearance of frailty. But that's to an untrained eye. Real estate executives and others connected to the avenue say there's much going on that's not easily noticed, and that just because a site is vacant doesn't mean it hasn't been leased to some retailer or brand moving in soon, or that negotiations for the location are happening. A darkened, bordered up site could actually be under renovation."There's a lot of musical chairs," observed Matthew Bauer, president of the Madison Avenue Business Improvement District, describing what seems to be the perpetual behind-the-scenes vying for sites and relocating on the avenue. "There are always moving parts and always new companies moving in."At an afternoon coffee last week at Bar Pleiades, chef Daniel Boulud's sophisticated lounge at the Surrey Hotel on 76th Street just off Madison, Bauer has brought a list of new businesses moving to Madison Avenue soon: Balenciaga at 840 Madison; Ceysson & Benetiere Gallery, 956 Madison; David Zwirner Gallery, 34 East 69th Street; Ever After Shop, 1121 Madison; Golden Goose, 935 Madison; La Goulue, 29 East 61st Street; Mackintosh, 833 Madison, and Stella McCartney, 929 Madison Avenue.He also turns the pages of  The New York Times to point out partial page ads, and said, "I see Madison Avenue brands showcasing themselves."Yet he doesn't white wash the situation, indicating that of the 480 ground floor businesses in the Madison Avenue BID, there are around 40 vacancies representing a vacancy ratio of just under 9 percent. The count includes both Madison Avenue and the immediate side street locations between East 57 and East 86 Streets, a stretch of slightly over a mile and a half.He acknowledges some recent closings on Madison Avenue, including Kara Ross, Fabergé, BCBG, Louis Leeman and Prada, and that a Thor Equity project initially had Qela, a Qatari fashion brand, coming in but the deal fell through. In addition, Zegna not long ago moved to Fifth Avenue.Bauer doesn't speculate on the future of the 230,000-square-foot Barneys New York flagship, at 660 Madison Avenue between 60th and 61st Streets. It's enjoyed favorable rents ever since it emerged from bankruptcy in 1998, commenced a 20-year lease in 1999 and has renewal options beginning in 2019, when the rents are subject to market rate adjustments and would theoretically skyrocket. There's speculation that Barneys could be downsized or worse, vacate the site if rates with the landlord Flagship Capital can't be agreed. That's not something the BID would welcome and Barneys certainly doesn't want to leave. A Barneys departure would create a gaping void impacting businesses for blocks in either direction.But there's plenty of positive developments bringing life to the neighborhood, as Bauer noted. "Bally opened an expanded flagship directly across from Hermès at 62nd and Madison. Balenciaga is opening at 840 Madison Avenue. You have Bottega Veneta expanding at 740 Madison Avenue, taking over four buildings in a gigantic expansion. You have Stella McCartney opening at 929 Madison Avenue. Brioni opened a flagship in January. There are now three Morgenthal Frederics eyewear stores within the BID, and Tom Ford is taking on a larger space at 680 Madison. Golden Goose is coming. La Goulue is coming back at 29 East 61st just off Madison Avenue. Acne Studios, a downtown store, moved uptown with another store and Elie Saab opened his first store. Noting how The Row recently took a building on 17 East 71st Street, right off Madison," Bauer said adding that a "lot of folks want to be in their own town houses" for a more residential feel."There is this strong local and loyal market here," Bauer stressed. "This is where people live and want to live. The biggest difference from other luxury streets is how locally dependent Madison Avenue it is."He also said rents are coming down, and at one point there were asking rents of more than $2,000 per square foot for some specific spaces, depending on who else was on the block. However, rents average between $1,100 and $1,200 on ground levels between 57th and 77th Streets, according to real estate sources.He sees some vacant pockets filling up, citing one group of spaces on the same block as the Met Breuer at 945 Madison Avenue. Leases there have been signed by Moynat, Aqua, Robert Clergerie and Nespresso, leaving just one available site."There is investment happening here," Bauer said.He also sees Madison evolving into category hubs, making the shopping easier. For example, the block between 63rd and 64th Streets has become a power jewelry hub with Graff, De Beers, David Yurman and Nirav Modi. The block between 64th and 65th has a concentration of accessories with Givenchy, McQueen, Loro Piana, Roger Vivier and Bottega Veneta, and the blocks from 63rd to 59th is shaping into a men's strip with Hermès Men's, Brioni, Berluti, Canali, Tom Ford, Eton, Beretta and Paul & Shark."There is a lot of movement. There are a lot of vacancies, and there are a lot of leases for sale or sublease. It's a function of the landscape. Some of the deals done were too aggressive. Sales haven't kept up, and new space came up though it's not just in this corridor," said Faith Hope Consolo, chairman of the retail group at Douglas Elliman.Consolo said there were 36 vacancies between 57th and 77th. "We haven't seen this much availability in a long, long time. A lot of retailers are opting for alternatives," she added, citing lower Manhattan's Brookfield Place and Westfield World Trade Center."There are lots of unoccupied real estate," agreed one retail expert who requested anonymity for the story. "Tenants can't afford the rents anymore with the exception of jewelers who can do business in smaller spaces than apparel shops, and have a huge gross margin. They can make it, but the normal apparel companies, unless they have real established deep pockets are looking twice at the benefits of being on Madison at this point, versus the costs to get on the avenue. There has to be adjustment of occupancy charges that matches better the amount of business that is being conducted. Luxury customers are behaving differently and not buying as much. People don't dress like before. They go to Uniqlo and Zara. I had a friend who just bought a beautiful coat that looks like my wife's Jil Sander.""We are working on new initiatives to get traffic — the type of traffic that shops," Bauer said.One is with the Robin Hood Foundation, where the organization's May 15 benefit provided 10 percent discounts to guests. Also, shopkeepers on Madison were donating a percent of revenues to Robin Hood.Departures magazine this fall will create a section spotlighting exclusive and one-of-a-kind products at the shops on Madison, with stores planning to showcase the items in their windows and creating blowups depicting the products.This year, a Madison Avenue "gallery walk" was staged involving 54 galleries staging talks and tours, and a web site. The annual Madison Avenue Watch Week involved 13 boutiques, a web site, demonstrations, meetings with the makers and showings of the latest timepieces launched at the 27th Salon International de la Haute Horlogerie and the 2017 Baselworld World Watch and Jewelry Show. For the event, design students from the School of Visual Arts created a public art installation, “A Moment in Time,” with 16 six-foot-tall watch-­themed sculptures, commemorating historic moments in time. One had a photo from 1892 when Ellis Island opened, and another had a sculpture of hands reaching up, to symbolize the legalization of gay marriage by the Supreme Court in 2015."Our street is not immune to the issues affecting other streets," Bauer said. "There is still a strong sense of that local market. It's time to double down and reach that client base through innovative programming."