Barneys isn’t abandoning Madison Avenue, but it will have to absorb a significant hike in its rent there come next year.

Speculation that Barneys would either vacate its 230,000-square-foot flagship or downsize it in face of the looming rent increase has been around for months as negotiations with the landlord Ashkenazy Acquisition Corp. were proceeding.

Barneys officials told WWD there are no plans to vacate or downsize the premises.

That said, Barneys is “disappointed” by the outcome of its arbitration with Ashkenazy granting a significant rent increase on Madison Avenue.

“The arbitration decision that came down [Friday] does grant Ashkenazy Acquisition Corp. an increase in rent although not quite to the magnitude previously reported. While we are disappointed with the decision, our customers remain our top priority and we continue to be committed to providing them excellent service, products and experiences at our Madison Avenue location,” said a Barneys official.

One media report indicating that Barneys’ total tab to the landlord on Madison Avenue, including a doubling of the rent plus other expenses, would be $44 million, was incorrect.

Barneys has been paying well below market rates on Madison Avenue. The rent has been set around $16 million. The lease was signed back in the late Eighties after Barneys came out of bankruptcy, and was subject to rent increases next year.

Barneys will be under pressure to increase sales and shopper traffic at the site, 660 Madison Avenue, as the higher rent will eat into profits. Barneys has been developing new kinds of experiences for its customers such as thedrop@barneys featuring designer appearances and exclusive product. And business for the luxury retailer is said to have shown some uptick recently along with some other high-end stores such as Saks Fifth Avenue and the Neiman Marcus Group.

While Barneys has been doubling down on efforts to lift online sales and make technology advances, it still believes in brick-and-mortar retailing. Barneys recently signed an agreement to open a store in Bal Harbour Shops, the luxury shopping center in Miami undergoing an expansion.

Barneys did not disclose its new rent.

Ground-floor asking rents on Madison Avenue in the 60s blocks are reportedly around $1,400 and have declined a few hundred dollars in the past couple of years due to high vacancies.

In its talks with Ashkenazy, Barneys did have some bargaining power given the area’s high vacancy rate and the costs Ashkenazy would have incurred to re-tenant its Madison Avenue property.

It is believed that Ashkenazy is also the landlord for the Barneys flagship in Beverly Hills which is also subject to rent increases. Sources describe Ashkenazy as a tough negotiator, even for a landlord.