Photo: Five Below
Does Five Below make sense for 5th Ave?
Five Below, the discounter, recently announced plans to open its first store in Manhattan on Fifth Avenue between 44th and 45th streets near Bryant Park, and the landlord community isn’t all happy about it.
Many feel General Growth Properties only made the deal because of a rent squeeze across the city.
“It’s not a Fifth Avenue-type tenant. Everyone is pissed,” an unidentified broker told Commercial Observer, citing a location south of 42nd Street as more appropriate. The broker added, “There goes the neighborhood.”
Others felt Five Below’s arrival would have a moderate impact since the location isn’t opening up above 49th street where shoppers come upon Saks 5th Avenue and then Bergdorf Goodman, Tiffany and many designer flagships. Five Below will sit near flagships for Skechers, H&M, the NBA, North Face and Adidas as well as a Best Buy.
Discounters have also become more common in upscale shopping districts, and Five Below isn’t a 99-cents store. Playing up a fun environment like a traditional toy store, Five Below sells a wide range of novelty items, from toys to graphic t-shirts, nail polish and cell phone cases, for $5.00 or less. The chain should drive traffic and supports tenant diversity. The flagship is 10,800-square-feet compared to Five Below’s traditional 8,000-square-feet-size.
Still, a concern is that T.J. Maxx, Old Navy or other discounters may follow.
“Fifth Avenue will always be Fifth Avenue. I don’t think it’s going to become the epicenter of Joe’s Bargain Store,” added Timothy King, CEO of CPEX Real Estate, told Real Deal. “But having said that, there is a reality, and if I’m an owner with a vacant space, and a tenant comes along and pays a rent that I’m comfortable with, I’m not sure that I can afford the luxury of saying, ‘No, I can’t afford to put this sort of tenant there.’”
Retail broker Robin Abrams, a vice chairman at Eastern Consolidated, told Commercial Observer, “It will likely attract off-price or discount retailers to the corridor — tenants that focused in Herald Square or on 14th Street prior — although low price points don’t have to mean ‘schlocky’ and both locals as well as tourists will go there.”
- Don’t freak out (too much) about Five Below on Fifth, brokers say – The Real Deal
- GGP Signs Five-Dollar Store on Prime Fifth Avenue—Some Brokers Say, WTF? – Commercial Observer
- Five Below to open NYC flagship on 5th Avenue – Retail Dive
- Retail rents in Manhattan keep going down – The Real Deal
- Five Below to open flagship store on Fifth Avenue – CNBC
Discussion Questions
DISCUSSION QUESTIONS: Should landlords be concerned that Five Below is opening on Fifth Avenue? Has the ideal tenant mix for upscale chains changed with the surge toward bargain hunting and other retail dynamics?
Poll
BrainTrust
Lauren Goldberg
Principal, LSG Marketing Solutions
Tony Orlando
Owner, Tony O's Supermarket and Catering
I love the fact that some people are annoyed at this, like Fifth Avenue is some kind of sacred shrine of upscale retail excellence. It’s really not — it’s a mix of lots of different concepts at varying price points. Always has been; always will be.
Five Below is a welcome addition, in my view. It sells a variety of useful products at good price points. I am sure consumers will use it and ensure it is successful.
Neal is correct, and this very much calls to mind an earlier “incursion,” albeit in happier times. Sadly, with the exit of Lord & Taylor, this section of Fifth will lose most of whatever cachet it has left, and should be happy there is still interest there.
There is always a question about maintaining the character of a neighborhood, whether residential or commercial. However, market conditions sometimes force changes. The discounter probably doesn’t belong in the upscale district. If other landlords are not happy, they should make sure to not lease space to these retailers that would detract from the character and clientele of the area. It is also possible that Five Below won’t thrive in that neighborhood.
The higher-end retailers are smart to be concerned. More so about the future arrivals of discounters like TJX, though, since Five Below doesn’t challenge fashion. Retailers understand that shoppers can get hooked quickly on the discounts! Once that takes hold; “there goes the neighborhood” becomes the upscale retailers’ biggest threat!
There’s a reason the space was available for lease to Five Below. It’s because another retailer (probably an upscale retailer) left. There’s no doubt that Fifth Avenue is known for upscale shops, but it’s time to face reality. It’s not just about bargain hunting. It’s that the retail strategy has changed. Online shopping changes the need to have brick-and-mortar stores. We’ll see other retailers adjusting their physical locations because of changes in the industry. As for Five Below, do we really expect a landlord will keep the space open in hopes of another upscale retailer coming in? I’m sure the landlord did what he/she could do to fill the spot with a retailer who is more aligned with the neighborhood, but business is business.
Some will call it progress and others will be upset, but you can’t stop giving into public demand. Whether it is Five Below or some other off-price store as long as there is a space available and the rent is right, an off-price retailer will move in. Many middle-class people don’t shop discount stores, but the majority do, and Five Below will find many upscale customers coming in and checking them out as well. Five Below is a fun store to browse and, yes, they have bargains. As for the upscale consumer, one reason many of them are wealthy is that they know how and not how to spend their money. There’s nothing wrong with a good bargain. I see Five Below doing well, and if a few more discount stores move into the neighborhood, it won’t destroy 5th Ave. Eventually, off-price stores will peak out and we’ll be concerned about the next big thing.
Five Below doesn’t have the name and prestige that you think of on Fifth Avenue — however, neither does H&M or Sketchers. With the trend towards bargain hunting, it shouldn’t concern landlords that much. Ultimately, the market will dictate whether this is a good move or not.
It’s supply and demand. It says a lot that a retailer like Five Below believes they can make the margins they need while paying Fifth Avenue rent. Research shows that for certain product categories even the wealthy like a bargain. They just better want a lot of them for this to work. This will be an interesting one to watch.
It’s really fascinating that this is even a question. Fifth Avenue’s true luxury blocks extend well above 47th Street. However, Fifth Avenue always has and always will be a retail showcase for all types and retailers operating at varied price ranges. So we should expect Five Below to not only survive but thrive on Fifth Avenue with all the tourist traffic.
The rise and omnipresence of the off-price and bargain-priced retailers over the past 15 to 20 years is a reflection of the overall economic conditions of our country, but also that consumers enjoy the treasure hunt or bargain shopping in general.
The market conditions have changed things dynamically, and now Five Below has a home on Fifth Avenue.
Shopping is discovery — those in-mall carts, stores-within-stores and pop-ups all add to it. Consumers will go where their feet take them. High-brow and low-brow always have a way of finding their comfort zone. Good on you Five Below. Benefit from the insights you gain!
Dissenters who hold Fifth Avenue to be somehow above discount shopping clearly haven’t looked around at the foot traffic. Yes you have your high-end, luxury shoppers, but you also have families with children, tourists from all over and discount shoppers as well. The “barbell” of success at both poles of the retail spectrum should leave room for the discount and the luxury experience and take advantage of an underserved segment while propelling Five Below into further mainstream awareness. It’s a smart move, even just in getting the promotion of this discussion as earned media.
Fundamentally, the addition of a value-oriented retailer is not necessarily a problem. The issue is who that retailer is and how their brand presents itself. H&M, Zara and Forever 21 have done a good job of creating upscale-light environments that sit well next to luxury brands, as the luxury consumer accelerates their embrace of “high-low” fashion, e.g. a Burberry trench over Zara jeans and a Forever 21 blouse. However, even though I am not very familiar with the Five Below environment, it doesn’t seem to present itself as a “cool chic” addition to higher-end neighbors. It does appear to be a bit of desperation on GGC’s part to fill an empty space with only financial considerations in mind vs. building a long-term strategy of higher rents by building cohesive “neighborhoods” of luxury combined with trendy retail and F&B offerings.
Let me get this straight: The landlord community is upset because Five Below is opening a store on Fifth Avenue, but it’s okay with Skechers, H&M, the NBA, North Face, Adidas and Best Buy having stores there? Like Five Below, these retailers are also stores typically found in malls.
They’re worried about Five Below ruining their pristine, designer neighborhood? Honey, that ship has sailed.
This is a great story. The key for those who might be concerned? Keep focused on making their stores a place where people want to go to shop — and where landlords can maintain rents. Otherwise, they are inviting more discounters into their neighborhood.
And let’s be honest about nearby, I’ve always felt that two blocks in New York is like a mile in most neighborhoods.
The dirty little secret is that even very affluent people shop at discount stores and yes, even dollar stores. While there are some vocal pretentious wealthy individuals that are upset with this news, I suspect there are a greater number of rich consumers that will shop at Five Below for the treasure hunt.
As others have mentioned, there are also middle-class people and tourists that will be frequenting this area, as there are already moderate-level retailers in the neighborhood (H&M, Barnes & Noble, Best Buy, etc.). It is good to see some diversity and maybe it will humble those that think they are too good for non-luxury retailers. Good luck Five Below — I hope you prosper on Fifth Avenue!
Where else would I get my Chuckles and Toni her Cowtails for $1?
Yes! Upscale is upscale and Five Below may be many things but upscale isn’t one of them. Fashion houses sell on perception as much as reality so those landlords should be concerned or we might see Dollar General on Fifth Avenue one day.
Really … NIMBY on Fifth? Who would have guessed? Next there may be an off 5th … or a Rack … what is the world coming to?
There’s an interesting convergence of style and discount that goes beyond Target. Consumers are diverse and I can see a Fifth Ave. mix that includes upscale chains and bargain hunting appealing to shoppers across the board.
I find this to be hilarious; the the snobs near 5th Ave are upset. What’s next, an Aldi and a dented can closeout thrift store? 5 Below will find out if it is a success in the first year, and if it does well, others may follow as their money is just as green as any other tenant willing to pay the rent. Visitors with families would love a break on the sky high prices for basic stuff in NYC, so they should do well.