Prada finally got tired of paying rent.
The World Famous Italian brand paid US$425 million for the building that houses its flagship store on Fifth Avenue in New York, in a bet on the long-term potential of the most valued shopping street in the world.
Prada has been renting five floors of this property since 1997. The building, located at number 724, has 12 floors and more than 6 thousand square meters.
The transaction implies a value of US$70,800 per square meter.
In a formal statement to the market, the board of the company, which is listed in Hong Kong, said it believes the property’s location offers “high strategic value” and “is characterized by increasing scarcity and long-term potential.”
The company also mention that, in addition to the space where the store is located, it will be able to use the building to store products and office space.
“The commitment from international brands proves and reinforces that New York and Fifth Avenue continue to maintain their place as the No. 1 shopping destination and the world’s premier avenue,” a Cushman & Wakefield broker told The New York Post .
In the real estate consultancy’s ranking of the most expensive retail destinations in the world, Fifth Avenue appears in first place, with a rent of US$21,400 per square meter.
The transaction came days after the news that Geshary Coffee, a Japanese coffee chain, had purchased a property on Fifth Avenue a few blocks from the Prada building, at number 560.
The idea is to create a flagship store for the brand after the contract with the current tenant, Oakley, ends next year. Geshary paid US$38 million for the boutique store, equivalent to almost US$30,000 per square meter, the highest amount paid for a property on the street since the start of the pandemic.
Rolex also recently said it will develop a new tower to house its headquarters at 665 Fifth Avenue, and Louis Vuitton is considering building a store on the street.
Andrew Goldberg, the vice chairman of CBRE, told the New York Post that “the phenomenon of big brands buying real estate , which we saw happen in the 80s and 90s, is coming back.”
The rental market is also on a boom on the Fifth Avenue. Swarovski has just leased a property at number 680, which housed a Gap store, and Marc Jacobs is in talks to lease number 645 on the street, where Armani has a lease that ends next year.
The building Prada is buying belonged to Wharton Properties, Jeff Sutton’s real estate holding company. Wharton purchased the property in 2012 for $223 million in partnership with SL Green Realty and Stonehenge Partners. In 2018, Sutton bought out his partners.
