The nation’s real estate woes are well documented, but prime retail space along Manhattan’s Fifth Avenue continues to draw interest.
Witness the joint venture between SL Green Realty Corp. and Stonehenge Partners that agreed to buy eight retail properties and 402 Midtown and Upper East Side residential rental units from the Frankel family for $416 million.
The deal, which is expected to close in the first quarter, includes buildings occupied by some A-list fashion names, including Prada and Armani.
A key component of the transaction for SL Green is 724 Fifth Avenue, where Prada occupies 20,700 square feet of retail and office space over several floors. The building is located between 56th Street and 57th Street.
“The property enjoys prime position along the ‘Gold Coast’ of Fifth Avenue — a retail corridor known to achieve some of the highest retail rents in the world,” said SL Green.
The venture will also pick up interests in 752 Madison Avenue, a four-story retail building completely occupied by Armani under a sublease agreement that expires in 2025.
Other components of the deal include interests in the mixed-use properties at 19-21 East 65th Street, a five-story building at 762 Madison Avenue, a commercial building at 44 West 55th Street, a 260-unit multifamily building at 400 East 57th Street, and a 125-unit multifamily building at 400 East 58th Street. Stonehenge will manage the residential properties acquired in the deal.
SL Green has been on a bit of a shopping spree. The New York-centric real estate investment trust has made a series of investments in retail properties, including the American Eagle and Aéropostale flagships in Times Square, and 747 Madison Avenue.
Outside the often rarified world of New York, the U.S. retail real estate scene is anemic along with the industry in general.
According to real estate information firm Reis Inc., the third-quarter vacancy rate at neighborhood and community shopping centers in 80 metropolitan markets held steady at 11 percent versus the second quarter.
“A mere 812,000 square feet of new neighborhood and community center space came online this period, keeping the level of new deliveries near all-time low levels,” said Reis senior economist Ryan Severino. “Unlike [the] office and apartment [sectors], which are already recovering, the lack of both demand and supply for new space is emblematic of a property sector that is still suffering more than two years after the technical end of the recession.”
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