Prada Buys Fifth Avenue Building

The Italian fashion company has been leasing its store in the 12-floor building at 724 Fifth Avenue since 1997

Prada has agreed to buy the building housing its flagship store on New York’s iconic Fifth Avenue, one of the world’s top shopping streets, for US$425 million, as demand from American consumers holds up against inflation and high borrowing costs.

The Hong Kong-listed Italian fashion company has been leasing its store in the 12-floor building at 724 Fifth Avenue since 1997, according to a stock-exchange filing made recently. It said the property’s location offers high strategic value after an influx of residential, hospitality and retail investments in the neighbourhood. It will continue to use the space for its store, offices and storage, the group said in the filing.

US retail sales are defying a global slowdown, with latest data showing an unexpected pick up in November that pushed towards the highest level since April 2022. While analysts expect some moderation in 2024 due to dwindling household savings and deteriorating credit conditions, spending in the country still looks steady compared to China, where a property market crisis is forcing consumers to tighten their belts.

Prada’s sales slowed in the third quarter, with net revenue missing analysts’ estimates and registering at €1.11 billion (US$1.18 billion). The Prada label, which accounts for more than 80% of sales, saw its growth slow to 5% in the quarter, down from 15% in the previous one.

The conflict in the Middle East and its wider global repercussions have had an impact on business, Prada’s CEO, Andrea Guerra, told analysts on an earnings call in October. But some luxury brands have shown resilience amid a global slowdown in demand for luxury goods. Hermes sales jumped in the third quarter as wealthy shoppers in the US and Europe splurged on the French company’s pricey Birkin and Kelly bags. The strength of the US performance was buoyed in particular by the label’s Madison Avenue store, which opened a year ago, chief financial officer Eric du Halgouet said on an October call.

Fifth Avenue took the crown from Hong Kong’s Tsim Sha Tsui as the world’s costliest shopping haven last year. At US$2,000 per square foot a year on average, it has continued to hold on to its title for a second straight year, according to Cushman & Wakefield. Via Montenapoleone in Italy’s fashion capital of Milan comes in at second place with rents of US$1,766 per square foot. Tsim Sha Tsui at US$$1,493 per square foot is third but retains its ranking as the most expensive retail destination in Asia-Pacific.