Swedish furniture giant Ikea is setting up a small-format store in a major retail and office project on Fifth Avenue in New York City, an area where luxury brands struggled after the pandemic deterred shoppers.
Ingka Investments, the investments arm of Ingka Group that owns most Ikea stores worldwide, disclosed the investment in 570 Fifth Ave. as part of Ingka Group’s long-term strategy to enhance its city center retail presence. Extell Development's 1 million-square-foot, mixed-use building is scheduled to be completed in 2028. The company bought the site in December 2019 for $263.7 million, according to CoStar data.
The commitment by Ingka Investments "allows us to move forward with the construction and leasing,” Gary Barnett, founder and chairman of Extell, said in a statement. “This will be the first office tower to begin construction in the city post pandemic and it is a great sign of New York’s resilience.”
The alliance between the two firms marks the largest development on Fifth Avenue in more than 60 years, according to Ingka. Holding a one-third stake in the new Class A tower, Ingka Investments will have full ownership of the prime retail space where the Ikea customer meeting point will be located.
The new store is set to occupy 80,000 square feet arranged over two large cellar levels with a corner entrance on Fifth Avenue at the intersection of the Plaza and Grand Central Districts.
“Investing in Fifth Avenue goes beyond just growing our footprint; it’s about changing the way we engage with consumers and playing a part in creating strong, sustainable economies and business communities,” Peter van der Poel, managing director of Ingka Investments, said in a statement.
Ikea disclosed plans earlier this year to open four of its new small-format locations in the United States as part of its $2.2 billion strategy to expand its reach across America. The chain made a similar move to its Fifth Avenue strategy involving an Ikea store in San Francisco last summer, when it opened a new urban location after Ikea's parent company bought ownership in a vacant mall in 2020.
Ingka Group is looking to evolve its retail operations by adapting to urban growth and changing consumer shopping preferences, according to van der Poel. In addition to introducing retail formats in city centers, the plan includes enhancing accessibility and convenience for customers.
Ingka Group has opened stores and shops in major cities including Tokyo, Madrid, Paris and London, and it's planning studios in Vienna, Barcelona, Berlin and Prague.