Bargain Plaza District Renewal Deal Secured by Michael Kors

Recent reports announced the renewal and expansion deal by luxury fashion and accessories brand Michael Kors. The lease that took effect in August nearly doubled the label’s footprint to 11,000 square feet at 667 Madison Avenue. The monthly base rent of $438 per square foot is similar to the previous rent despite the expansion, since the retailer negotiated a 49% markdown from the prior rate of $862 per square foot according to reported information from credit-rating agency KBRA. S&P Global reportedly stated in August that the rents the property can “charge for retail space have declined by 36% since 2016;” and despite the building on track to reach 84% occupancy by the end of the year, it is unlikely that its cash flow will return to historical levels. Other prominent retailers that similarly enjoyed rent reductions this year include LVMH-owned beauty products retailer Sephora’s 66% rent reduction at 520 Madison Avenue, which lowered the annual rent for the 6,400-square-foot space from $3 million to $1 million; and Regent L.P.’s casual clothing label Club Monaco secured a rent price for an extension of its 13,000-square foot space at the Charles Scribner’s Son’s Building, 597 Fifth Avenue that was reportedly 80% below the 2019 pre-pandemic rate for the area. A rise in the number of luxury brands negotiating for significantly lower rents comes at a time when sales within the sector have been lackluster amid softening demand globally for luxury fashion goods; and although there are “fewer empty storefronts in the Plaza District,” space remains plentiful.”

Source:    https://www.crainsnewyork.com/real-estate/michael-kors-cuts-rent-half-madison-avenue-store