Locals and tourists alike can attest to the fact that New York City has lost some of its shine post-pandemic, and now a new report suggests the same is true for the fashion industry.
No longer the hub of the nation’s clothing production that it once was for nearly a century, the city’s fashion industry is at a crossroads due to a myriad of variables. And that decline has meant that New York has lost some of its luster compared to Paris and Milan, according to “At a Crossroads: New York City’s Status as a Global Fashion Capital.” The analysis, commissioned by the New York City Partnership, was conducted in collaboration with McKinsey & Co. and included input from more than 40 industry executives and insiders, including representatives from brands, retailers, investors, the media, homeowners, trade shows and educational institutions.
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There’s a lot to consider. The 40-page study suggests that government and industry leaders must decide whether to make a strategic investment in the future of the sector or risk losing fashion’s contribution to the city’s economy, culture and brand. In addition to suggesting that world-class designers and their companies are less engaged with New York and its institutions, the report notes that the biennial New York Fashion Week has become less prominent. Add to that the fact that fewer students are completing programs at the city’s fashion schools, and many of those who graduate are opting to work elsewhere. Then there’s the global distribution of the supply chain and the ongoing issues within it, as well as consumers’ interest in online shopping and how that’s affecting commercial real estate and retailers.
In an exclusive interview Friday, Kathryn Wylde, president and CEO of the Partnership for New York City, acknowledged the challenges but expressed optimism for the future. “We are still the fashion capital, certainly for innovation in ready-to-wear fashion,” she said, interviewing employees at companies including LVMH, Tapestry, Tory Burch, Bloomingdale’s, Macy’s, Saks Fifth Avenue, Tapestry and Lafayette 148. “But the question is, ‘Can we sustain that given the challenges we face today?’”
“The partnership’s members and industry leaders understand what’s at hand and want to take action,” Wylde said. “We knew how important the industry was to our global brand, our celebrity status, our jobs and our economy,” he said.
Assessing the Challenges
He said tariffs on China, which began under former President Donald Trump and have continued under President Joe Biden, were a factor. He also highlighted ongoing supply chain issues that began during the pandemic shutdown. The industry’s dilemmas include the rise of e-commerce and fast fashion, and the city’s soaring cost of living and real estate, which are hurting young talent’s ability to live and work here. (As of this week, the average monthly rent for a studio apartment in the city was $3,158 for 442 square feet.)
The study highlights how important it is for the city’s economic strength and international image to keep the industry running on all cylinders. In 2022, the city saw $96 billion in fashion, jewellery, footwear and other goods sold, including $51 billion in direct sales [which includes their lodging] and $45 billion in indirect sales. Fashion, of course, is also a source of jobs. Two years ago, the industry employed more than 130,000 residents and generated more than $20.4 billion in gross city product. But the industry’s GCP—the market value of all fashion goods and services produced in the city—fell 13.6% between 2012 and 2022 and has yet to fully recover, according to the report. Additionally, there are about 50,000 fewer people employed in fashion in the five boroughs than there were a decade ago.
The city’s garment district employed about 46% of the city’s workforce in its heyday from 1920 to 1980. But cheaper offshore clothing production in Hong Kong, Seoul and elsewhere began to erode local manufacturing in the ’60s, and it has become more concentrated over time. By 2018, local manufacturing accounted for 4% of Garment District jobs, and in response, city officials agreed to de-zoning to attract a broader mix of businesses. More recently, this year the New York City Economic Development Corp. launched the M-CORE program to provide tax breaks to real estate developers to support the renovation of underperforming commercial buildings. The initiative includes efforts designed to revitalize segments of the fashion industry.
Wylde praised one example of a private-public effort launched through M-CORE — a 31-story tower at 161 Water Street owned and operated by WSA Waterfront LLC and Milky 100 LLC that is being upgraded to attract fashion, arts, creative and technology tenants of all sizes. Retail, offices, manufacturing facilities, art galleries, screening rooms, meeting spaces and other spaces will be part of the hybrid layout. The same developer worked with designers on a space in Brooklyn that is rising, according to Wylde. “The point is that the government is not the first in and the last out,” he said.
Fashion’s citywide ecosystem is significantly more dispersed than in past decades. The Garment District, which covers about 24 blocks of 34, now has about 125,000 jobs.pearl To Street 42And The street stretches from 11th Street and Fifth Avenue to Ninth Avenue. But these positions aren’t just tailors and pattern cutters. They also include artists, architects, graphic designers, nonprofits, business support services, and other commercial tenants. The Midtown neighborhood is no longer home to the city’s one-stop fashion ecosystem. Starting in the ’90s, a number of big-name designers and major manufacturers, along with smaller ones, moved out of the neighborhood to other neighborhoods in Manhattan and the lure of more space in Brooklyn.
To Wylde, these hybrid ventures, which bring real estate and fashion together in a new way, are cause for optimism. For years, subsidizing the Garment District was a focus, but at the time the city was a manufacturing hub. That model is outdated, considering New York is “an art design marketplace,” Wylde said.
In 2022, more than 2,600 fashion-related degrees and certificates were awarded to students at the Fashion Institute of Technology, The New School’s Parsons School of Design, and Pratt Institute.
If They Can Get There…
Wylde said the affordability of living and doing business in the city had “changed dramatically”. “We are now the third most expensive city in the world after Singapore and Zurich [based on Numbeo’s Cost of Living Index by City.] This is difficult for every sector [in the city.] “But the key to our success in fashion is that we have always attracted young and diverse talent. Now they can do something that is too expensive and too far away. They don’t have to be here. That combination has created a slowdown in young talent.”
That led to declines in jobs, economic output and student enrollment in design-related schools, which in turn nurture talent, he said. Until the administration of former New York City Mayor Michael Bloomberg, the city tried different efforts to support incubators, but “those efforts were not sustainable without 100 percent government funding,” Wylde said. “Going forward, the key is to include industry leadership working with government and the nonprofit sector.”
The proposals focus on support from government and other sectors, and leadership from industry. In the past, government funding for certain initiatives lasted for a few years and then was removed. “It wasn’t sustainable because there was never a model that the industry really embraced. Some of the new models [take hold.]”
Recommendations for Moving Forward
The study maps out potential solutions from the outset, as well as the challenges facing the industry. The recommendations include establishing a sustainably-sourced designer accelerator; creating a central designer campus where participants can work, pool resources, and learn from each other; developing curated showcases to rotate new designers; expanding industry and school partnerships to nurture talent, improve diversity, and create more opportunities; reinvigorating New York Fashion Week by championing emerging names; and increasing the visibility of the industry to attract global leaders by taking inspiration from non-fashion events like SXSW, introducing AR and VR technologies, or experimenting with other initiatives to engage.
As the report notes, boosting New York City’s fashion scene could help business in other ways, too. Fashion and shopping are a big draw for many of the city’s annual visitors, who welcomed more than 62 million people last year, including 13.5 million international visitors. The $74 billion economic impact included $48 billion in direct spending, which includes accommodations, and is expected to reach $68 million by 2028, according to the report. And in 2017 — the most recent data available — NYFW brought in $600 million for the city, with visitors spending an average of $2,500. That was “far more” than rival fashion weeks in London, Paris and Milan combined, the study said.
About 20 million square feet of “wonderful new office space” has opened in Hudson Yards, said Wylde, who cited “over-mortgaging and over-pricing” in the city’s pre-COVID-19 outdated commercial real estate market. [the 73-story One] Vanderbilt [near Grand Central Station,] “In Penn Plaza and Lower Manhattan.” While the study noted how brands are aiming to increase productivity with smaller footprints, it also pointed to larger investments such as Prada’s purchase of two buildings on Fifth Avenue for about $850 million, Kering’s recent $1 billion purchase, LVMH’s redevelopment of Tiffany & Co.’s flagship and Hermès’ plans to acquire a permanent location in Williamsburg.
Barneys New York, Opening Ceremony and Henri Bendel have all closed in the past five years, and the stores “don’t have the resources they used to because so much of the business is generated online,” was part of the partnership’s impetus to explore the question, “What’s the problem? And what can we do about it?” Wylde said.
Factors of Real Estate
While some developers are making “big investments” in commercial real estate renovations, Wylde said owners who choose not to invest in older spaces are leaving office buildings vacant. That can lead to lower prices and foreclosures, he said, which can lead to more affordable options and alternative uses for emerging creatives. He hopes a similar outcome to the current commercial real estate problem could be “good news,” recalling how such scenarios in the ’70s and ’80s led to young artists and designers flocking to areas known as SoHo and Tribeca. “We transformed communities because young artists could afford to live and work there,” Wylde said.
To put a plan into action, a meeting will be held on Oct. 24 to bring together representatives from real estate, finance, fashion companies and retailers to discuss proposals, get feedback and consider the possibility of a public-private partnership. “The industry union — the CFDA is national and global. We don’t have a union in New York. We think that’s what we need — an industry-focused city union that includes all dimensions — real estate, marketing, retailers, big fashion companies, small designers and universities,” Wylde said.
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