Manhattan Retail Condo Commands $324M

March 7, 2011
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user morrissey

It’s a small space but it fetched a gargantuan price. A 38,750-square-foot retail condominium space at 666 Fifth Ave. in Manhattan has traded in is a mega-transaction valued at $324 million. Spain’s Inditex Group purchased the space, the former home of an NBA store, from a joint venture involving Carlyle Group, Crown Acquisitions and Kushner Cos.

The condo last changed hands in 2008, when Carlyle and Crown shelled out $525 million for a majority stake in the retail segment at 666 Fifth Ave., the 1.6 million-square-foot, 41-story Fifth Ave. skyscraper located between 52nd and 53rd streets near Rockefeller Center and the Museum of Modern Art. Savills L.L.C. represented Inditex in the purchase and negotiations for the NBA store’s early exit from the space that will become the flagship site of Inditex’s Zara store. Zara’s neighbors will include Uniqlo, a clothing store that signed a lease valued at a staggering $300 million in April 2010.

The Manhattan commercial real estate industry is all abuzz about the $8,361 per square-foot price tag involved in Savills’ purchase of the former NBA store space at 666 Fifth Ave. The average per square-foot retail investment sale price in Manhattan in 2010 was a mere $1,962 in comparison, according to a report by commercial real estate services firm Cushman & Wakefield. And if a mammoth retail sale were going to happen in Manhattan, it would happen in the Upper Fifth area. The portion of Fifth Ave. stretching from 49th to 60th streets continues to hold the title of Manhattan’s most expensive retail corridor, with average ground-level asking rents soaring above $2,000 per square-foot, as per the report.

It comes as no surprise to industry players that the retail condo at 666 Fifth Ave. commanded international attention. The Association of Foreign Investors in Real Estate concluded from its annual survey that New York is the number one city in the world for foreign real estate investment in 2011, and retail ranks number two for preferred investment property type in the U.S. “We are seeing a tremendous amount of overseas capital looking to make strategic acquisitions in the United States,” John D. Lyons, CEO of Savills, told CPE. “Overseas capital sees stability in the U.S., ease of acquisitions due to clarity of legal and title and the ability to acquire significant institutional-grade assets that are located in many of our major cities.”

The dollar has a great deal to do with foreign investors’ interest in the country’s commercial real estate market as well. “Overseas capital sees the U.S. dollar as opportunistically low compared to their currencies, so they can be more competitive in the bidding process.”

Eagerness to take a bite out of the Big Apple and other leading markets is also based on what the future may hold. “It is widely held among global real estate investors that the U.S. will provide some of the strongest appreciation in real estate in the foreseeable future,” Lyons said. “It is a function of their belief that our economy is getting stronger and that we are doing all the right things to strengthen it.”

Savills, an international investment advisor, recently took a step to further accommodate clients’ increasing desire to take advantage of commercial real estate opportunities in the U.S. The company just established Savills Cross-Border Investments group. “Savills operates globally and we represent a tremendous number of sophisticated investors who look on a global basis to place capital into real estate, and their focus has been centered on the U.S.”