Tiffany Vacancy Looms for Trump in Weak Midtown Manhattan Market
(Bloomberg) -- At a time when midtown Manhattan is struggling with empty storefronts and a plunge in luxury shoppers, the Trump Organization is facing the prospect of having to fill retail space at a prized property just off Fifth Avenue.
Tiffany & Co., which currently occupies Trump’s 6 E. 57th St. as it renovates its nearby flagship, plans to move back to its longtime home by mid-2022. The companies that hold the lease at the Trump building, Wharton Properties and SL Green Realty Corp., won’t extend it when it ends next year, according to people with knowledge of the matter.
That means the 74,000-square-foot space -- commonly known as NikeTown for its former tenant -- will be handed back to the Trump Organization. The company holds a long-term ground lease at the building, located around the corner from its marquee Trump Tower.
Eric Trump, executive vice president of the Trump Organization, declined to comment, as did spokespeople for Wharton and SL Green.
Filling the five stories of retail space will be a challenge. The drop in tourists and office workers from the Covid-19 pandemic has sent Manhattan’s store vacancies soaring, and the pain is likely to linger for landlords even after the virus ebbs. Meanwhile, the Trump brand is hurting after Donald Trump was impeached a second time for his role in inciting a deadly riot at the U.S. Capitol.
The damage is especially acute in Trump’s hometown of New York, where the former president won only 12% of the Manhattan vote in 2020. New York City said it is canceling management contracts with the Trump Organization in the aftermath of the riot, while some Trump-branded properties have stripped the name or are looking into doing so.
Some office and retail tenants won’t consider moving into Trump buildings, said Ruth Colp-Haber, president and chief executive officer of brokerage Wharton Property Advisors.
“Leasing any retail or office space at this point in New York is difficult,” said Colp-Haber, whose company isn’t tied to the Wharton Properties that holds the Trump lease.
The 57th Street building is “a Triple-A location. The building itself, the spaces are really nice, it’s a lot of glass and steel, it’s extremely nice spaces. But for some users there’s definitely a stigma,” she said.
Wharton and SL Green took over Nike Inc.’s lease obligations at the building as part of a 2016 deal to relocate the footwear brand to its current New York flagship at 650 Fifth Ave. Tiffany agreed to sublease the space in 2018. A representative for the company confirmed the jeweler will be moving back to its renovated 727 Fifth Ave. space next year.
Subleases are typically at discounted rates relative to the market. Tiffany has been paying $7 million a year for the 57th Street space, according to a person familiar with the agreement, who asked not to be named because the details are private. On Upper Fifth Avenue, asking rent slipped 3.7% in the fourth quarter to $2,575 per square foot for ground-floor space, according to a recent report from Cushman & Wakefield.
Swapping Nike for Tiffany was a step up for the Trump Organization, said Elie Hirschfeld, a New York real estate developer and Donald Trump supporter, who worked with the former president for years.
“Tiffany’s is upscale, so it improves the Trump brand, it improves the Trump building,” he said.
The areas around Trump Tower may benefit from the end of Trump’s presidency. In 2016, when Tiffany was in its main Fifth Avenue store, the company indicated heightened security was curtailing visitors. Now that Trump is out of office, the barricades and police officers are gone, which could bring back some much needed foot-traffic to the neighborhood.
Unlike other Trump buildings across the city, the 57th Street store has few signs of being a Trump property. The former president’s name is not plastered across the front in gold lettering, like at the hulking 58-story Trump Tower.
On an afternoon visit this week, the Tiffany store was mostly empty, with security guards and employees far outnumbering the handful of shoppers. The store is decked out in Tiffany’s signature blue, including on a reconstruction of the Empire State Building spanning the store’s five floors.
Outside, the streets were fairly quiet, as are the luxury stores on the other side of the road: Burberry, Saint Laurent, David Yurman and Miu Miu.
On Fifth Avenue, stores including Valentino have closed during the pandemic. The retail availability rate on Upper Fifth Avenue, between 49th and 60th streets, was 23% in the fourth quarter, according to Cushman & Wakefield.
Hirschfeld said he expects the shopping corridor to rebound because of its global recognition.
“I believe that the finest streets in all the world are suffering now,” he said. “But this will come back, it’ll come back strong.”
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