By  on October 16, 2006

Fifth Avenue is in the midst of an identity crisis.

Bergdorf Goodman and Tiffany grace the famed intersection at 57th Street. Well-heeled shoppers wrapped in Burberry and Ralph Lauren clutch baby blue shopping bags and meander through Bulgari, Gucci, Versace, Cartier and, at the end of a short walk, can skate in and out of the chic Saks Fifth Avenue, at 50th Street.

Yet just a few blocks further downtown, just beyond the reaches of Saks, the avenue takes a drastic turn to the inelegant.

In the upper 50s, shoppers spend thousands on jewelry and designer clothes. Retailers spend an equal amount to gain access to those shoppers, investing upward of $1,000 a square foot to secure space on the avenue. According to Colliers Inter­national's 2006 retail real estate report, Fifth Avenue in the 50s remains the single most expensive retail street in the United States, with the average rent increasing by $50 a square foot in the past year.

Even as the price point of the merchandise lowers a bit, the stores in the lower 50s on Fifth Avenue remain upscale. Kenneth Cole and a H&M flagship adorn Rockefeller Center, while Lacoste stretches the reaches of luxury to the southwest corner of 49th Street.

The streetscape changes in the 40s.

The popular Build-A-Bear dominates 46th Street, while athletic apparel stores such as Journeys and Fossil and fast-food restaurants occupy the remaining length of Fifth down to 42nd Street. And with a few exceptions, beyond 42nd Street remains the sphere of cheap electronics stores, cramped delis, discount fashions and tourists more likely to be wearing "I Love N.Y." T-shirts than an Hermès scarf.

The days of the underretailed lower Fifth Avenue, however, are numbered. Though retail rents are a mere quarter of the rents on the upper reaches of Fifth Avenue, at roughly $250 a square foot, according to brokerage Newmark Knight Frank Retail, they are on the rise. New residential and commercial developments are starting to take hold in a streetscape currently dominated by vendors selling 99 cent stamps and "cashmere" pashminas, and more upscale retail is sure to follow.

"There is really no good reason why that stretch of retail from the 40s down to the Empire State Building isn't a viable shopping district, except that it's been neglected," said Jeffrey Roseman, executive vice president of Newmark Knight Frank. "The traffic is as strong there as any other part of the city. There's enough office density and a growing residential market."Leases of the fashion discounters and the mom-and-pop electronics stores and souvenir shops are coming due, said Roseman, and landlords eager to capitalize on the development momentum of the avenue are likely to scale up the rents and pave the way for more destination fashion retail south of 42nd Street.

The repositioning of Lord & Taylor, which sits at 424 Fifth Avenue, at 39th Street, also will have a massive impact on the avenue. Its new owners, NRDC Equity Partners, have announced they intend to shrink the store and perhaps redevelop the site. The possibilities for the store are especially juicy, given that Apollo Real Estate Advisors, one of the investors in the Time Warner Center, was the silent partner in acquiring Lord & Taylor.

"I think Lord & Taylor will become a multiuse development, maybe even a mini Columbus Circle," predicted Laura Pomerantz, principal at PBS Realty Advisors. "I think the department store will keep its footprint, and there could be a hotel, residential, or even an office component added to it."

Other speculation includes Nordstrom, which is perennially shopping for real estate in New York, swooping in and buying the Lord & Taylor building in its entirety. "The real question is whether or not Nordstrom is powerful enough to resurrect lower Fifth," said Gene Spiegelman, executive director of Cushman & Wakefield Inc. "Would it be such a strong destination that it would have a satellite effect of better retail joining them on the street?"

Today, the last frontier of fashion retail is still 42nd Street. But not for long. Pomerantz likened the move down Fifth Avenue as similar to the movement south on Broadway in SoHo: "Nobody used to go below Spring Street, either. Now look at the retail at Spring and Broome because of Bloomingdale's," she said.

New stores may generate more excitement. H&M is planning a major store at 505 Fifth Avenue, on the northeast corner of 42nd Street, which is expected to become a hot spot for both tourists and locals when it opens next spring.

Real estate brokers hope that H&M will become more of a draw than Sean John, which opened with much fanfare more than two years ago on 41st Street, but has done little to draw the fashion further south. Part of the problem, at least from a real estate perspective, is the New York Public Library, which takes up several blocks of space in a prime commercial area. Though the building is beautiful, it does little to generate traffic and eats up the entire vista opposite Sean John.The exception, of course, is during New York Fashion Week, when designers, editors, and socialites flood Bryant Park and lower Fifth. Then, empty retail space, such as that vacated by Pier 1 at 461 Fifth, on the northeast corner of 40th Street, becomes a hot commodity for designers throwing parties and small fashion shows.

The transformation of Fifth Avenue to some happy medium between Tiffany and a souvenir shop is happening, albeit slowly.

"Fifth Avenue is one of the few remaining stretches in the city that can be transformed from a retail perspective," said Roseman. "It's such a diamond in the rough for so many reasons."

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