R
etailers are increasingly opting for ownership over leasing in prime city locations due to soaring rents. Luxury brands like Kering and Prada have already made significant purchases on Fifth Avenue, with Uniqlo buying 100,000 square feet of retail space at 660 Fifth Ave. from Vornado for $350 million.

    Brokers are marketing "forever homes" to big fashion houses in the base of the new Mandarin Oriental Residences at 685 Fifth Ave., where brands like Coach and Tag Heuer currently reside. Steven Soutendijk of Cushman & Wakefield notes that smart retailers are buying before rents get out of control again, with availability at an all-time low since 2011 or 2012.

    Ikea is taking a unique approach by investing in the construction of its future store at 570 Fifth Ave., while Adelaide Polsinelli of Compass reports that restaurants and streetwear brands want to buy locations in Little Italy and Soho. Investor Isak Andic's company has bought several stores downtown, including one occupied by Cotton On.

    Ikea's parent company is also buying 70,000 square feet in the base of Extell's new office tower at 570 Fifth Ave., investing in the project as well. Bernadette Brennan of Serhant Commercial notes that investors want to collect income from tenants and not have vacant spaces.

    Smaller retailers are also buying up space, with Brennan selling two small retail condos for nearly $1,400 per foot to owner-users. There are tax advantages to ownership, including avoiding exorbitant retail rents in Manhattan and taking advantage of the federal 1031 tax-free exchange.

    Religious groups, childcare companies, and private schools, which don't pay real estate taxes, are also in a stronger position to buy space. Investors are driving sales of occupied spaces, with Brennan noting that they want to collect income from tenants rather than having vacant spaces.