MAC Cosmetics, a division of Estee Lauder, is rumored to have signed a record-breaking $3,000 per sq. ft. lease at 691 Fifth Avenue, near 54th street. The building is owned by Vornado Realty Trust, and the 1,400-sq. ft. space was formerly occupied by Elizabeth Arden’s Red Door Spa.
Fourth quarter reports indicate that the average rent on upper Fifth Avenue was $2,388 per sq. ft., securing it as the most expensive retail strip in the world. If the rumors are true, the MAC Cosmetics transaction sets a new high for the location.
A few factors gave the landlord strong leverage on the asking rental price: the property’s prime location fairly North on the East side, the fact that it has been the only small piece of real estate to become available on Fifth Avenue in some time, and that the tenant already rented there desired to renew their lease.
The questions to be answered now are whether the property is worth the price, if MAC Cosmetics can sell enough to justify maintaining such a pricey store, and how it will affect the rent of neighboring properties. Experts assume that while MAC is intending to use the space as a brand-promoting flagship store, the likely wider implication of the deal would be an upward movement in rents in the Fifth Avenue submarket, which might completely price out middle market retailers. [RetailTraffic]
