Financial Times
April 17, 2011

Foreign retailers of “cheap chic” are colonising New York’s Fifth Avenue as the shopping street that was once a symbol of luxury is transformed by the changing habits of money-conscious consumers.

Spain’s Inditex will start work in the next few weeks on a flagship Zara store in a $324m property it bought last month, while Fast Retailing of Japan is planning to open a Uniqlo outlet in the autumn after signing a 15-year lease for more than $300m.

The two companies will rub shoulders with high-end brands such as Tiffany, Bottega Veneta and Prada as the Fifth Avenue streetscape becomes a reflection of consumers’ desire to save money on basics so they can splash out on luxuries

So-called “high-low” shopping emerged from the depths of Japan’s two-decade economic slump and became entrenched in Europe and the US during the downturn triggered by the financial crisis. But in many big cities luxury shopping zones still remain segregated.

Joe Sitt, head of Thor Equities, a real estate group that paid $142m for a Fifth Avenue building last year, said many US retailers had been reluctant to go global at a time when Zara, Uniqlo and Hennes & Mauritz were becoming mass market global brands.

“They surpassed US retailers in their ability to execute. Now they’re coming to eat America’s lunch,” he said.

Rather than devaluing the avenue, property agents argue that the high-volume sellers of $40 jeans and $10 T-shirts are enhancing its appeal to shoppers – and pushing up rents in an otherwise sickly retail property market.

Average rent on the most prestigious strip of Fifth Avenue, between 49th and 59th streets, climbed to $2,367 per square foot by the end of last year from a low of $1,400 at the nadir of the financial crisis, according to the Real Estate Board of New York.

Yasunobu Kyogoku, chief operating officer of Uniqlo in the US, said his company wanted to be there because “it is an iconic global location and our stores are the best advert for our brand”.

Zara already has a smaller Fifth Avenue store and Sweden’s H&M opened an outlet in 2000.

“There’s synergy between luxury retail and fast fashion,” said Joanne Podell, executive vice-president at Cushman & Wakefield, a real estate broker. “You can put on an H&M T-shirt with an Armani jacket and look cool. There’s no prejudice any more.”

The avenue’s most illustrious name is still Tiffany, the jeweller brought to fame by the 1961 film Breakfast at Tiffany’s. It sits opposite Abercrombie & Fitch, a US teen fashion emporium renowned for its thumping music and scantily-clad staff.

Faith Consolo, chairman of Prudential Douglas Elliman’s retail leasing division, said luxury brands did not look down on their lower-priced neighbours: “They enjoy the increased traffic from people who buy small gifts. Most of the Tiffany business is key rings, not wedding rings.”

Cheap Chic Lifts Fifth Avenue’s Fortunes