Ikea will open a Fifth Avenue location as its investment arm purchases a Manhattan skyscraper

Ikea will soon occupy Manhattan’s elegant Fifth Avenue, which is home to upscale retailers like Tiffany and Chanel.

The main Ikea retailer Ingka Group’s investment arm, Ingka Investments, announced that it was acquiring a minority interest in a new tower being built on New York City’s premier retail street. This move will enable the Swedish furniture company to open a “customer meeting point” in the renowned retail district.

Along with continuing a recent trend of large international retailers, such as LVMH, buying up prime real estate in major cities across the world, the investment represents Ikea’s most recent attempt to enter the US market.

Ingka Investments, which owns most Ikea stores globally, will own preferred equity in addition to a third of the one million square foot building at 570 Fifth Avenue under the terms of the agreement announced on Monday. The remaining two-thirds will be owned by US developer Extell Development Company.

In a press release, Ingka Investments stated that it is still in the very early phases of planning for the Ikea location, but it would have complete ownership of the 80,000-square-foot retail space where it intends to establish an Ikea customer meeting point.

Ikea states that in an attempt to increase “accessibility” for consumers in big cities and metropolitan areas, it opened more than 70 of these meeting places last year worldwide. These meeting points include pop-up stores, small-format stores, and planning studios. Customers can meet consultants in planning studios, which are significantly smaller than regular Ikea stores, and place orders for home delivery.

The deal’s financial information has not been made public. Almost two decades have passed since Extell began to assemble the site, which is less than a 10-minute walk from Grand Central Terminal station, but the building has not yet begun. By 2028, the first tenants should be able to move in.

“We are excited to share the news of this major investment that boosts our growth strategy across the US, a vital market for Ingka Group,” said Peter van der Poel, a managing director at Ingka Investments.

It was anticipated last year that the largest economy in the world would surpass Germany as Ikea’s largest country in terms of sales, so the company announced plans to open eight massive stores and nine smaller planning studios and order points in the US.

For the furniture brand, the market in New York City has proven difficult. Ikea shut down its planning studio on Manhattan’s Upper East Side in 2022, less than three years into its operation, citing high rent and lower-than-expected pedestrian traffic. Not even two years after opening, the retailer closed its Queens location in 2022, leaving it with just one Brooklyn location.

Ikea’s investment is in line with the current trend of major companies buying expensive real estate in major cities. Recently, Kering and LVMH have jointly invested over €5 billion in prime real estate locations across Europe and the US.

Recently, Fifth Avenue in New York has seen announcements of investments from Prada, Kering, and LVMH.