The street that dresses Manhattan’s wealthiest residents is still wearing the scars of the pandemic. But recently, there are signs of healing on Madison Avenue.

The famed shopping district, which relies more on locals than tourists, is coming back to life as New Yorkers return to the city, head back to the office and attend society events such as the Met Gala. Falling rent prices and rising availability have also created opportunities for younger retailers and even pop-up shops to open in storefronts normally reserved for...

The street that dresses Manhattan’s wealthiest residents is still wearing the scars of the pandemic. But recently, there are signs of healing on Madison Avenue.

The famed shopping district, which relies more on locals than tourists, is coming back to life as New Yorkers return to the city, head back to the office and attend society events such as the Met Gala. Falling rent prices and rising availability have also created opportunities for younger retailers and even pop-up shops to open in storefronts normally reserved for established luxury brands.

Lower rents are motivating new tenants as well as others relocating from elsewhere in the city to sign leases, said Steven Soutendijk, executive managing director for Cushman & Wakefield Retail Services. Affluent Madison Avenue shoppers haven’t been hit by the pandemic to the degree they were during the 2008 financial crisis.

“People still have money,” Mr. Soutendijk said. “Consumer confidence is high and people are shopping and buying merchandise. And that definitely includes luxury items across the board.”

Jeweler Paul Morelli said sales at his Upper East Side store have nearly recovered after falling 35% during the pandemic.

Madison Avenue, a historically prestigious address for upscale fashion brands and jewelers, was losing some of its luster before Covid-19, as more luxury shoppers turned to e-commerce and retailers began to balk at the corridor’s sky-high rent. The now-defunct luxury department store Barneys complained of high rents on Madison Avenue and closed that store in February 2020 after filing for bankruptcy protection.

The pandemic made things worse by displacing residents to their homes in the Hamptons and elsewhere, and disrupting the neighborhood’s galas, work functions and other formal, in-person events that drive much of the district’s business. Madison Avenue storefront vacancies stood at 16% in September, compared with 9% two years before, according to the Madison Avenue Business Improvement District. The pandemic caused a higher rate of vacancies on Madison Avenue than the economic downturn in 2008 or the Sept. 11 terrorist attacks, said the BID’s president, Matt Bauer.

Retailers sticking around have been able to drive a hard bargain. Madison Avenue’s asking rent was $743 a square foot in the second quarter, a 9.6% decline from a year earlier and less than half peak levels in 2015, according to real-estate brokerage Cushman & Wakefield.

The Upper East Side shopping corridor’s sidewalks are still quieter than its downtown counterpart. While visits to Madison Avenue retailers were 18% lower in August than two years ago, foot traffic in SoHo’s Broadway shopping district was up 10% compared with 2019, according to data-analytics firm Placer.ai, despite the lack of foreign visitors that pre-pandemic flocked to the neighborhood.

Madison Avenue retailers rely on continued loyalty from established, often local, clientele more than foot traffic, Mr. Bauer said. Store managers have told him that sales are highest on weekday afternoons, when the streets are quieter and deep-pocketed shoppers book private appointments.

Jerry Pozniak, CEO of Jeeves, outside his dry-cleaning business on East 65th Street off Madison Avenue.

Mr. Pozniak said business has improved recently.

Jerry Pozniak,

chief executive of Jeeves New York, a luxury dry cleaner located on East 65th Street off Madison Avenue, said he has noticed a recent uptick in business.

“We’ve started to see a lot of our regulars come back,” he said. “People are now wearing clothes again other than loungewear.”

His store’s revenue dropped 80% in April and May of 2020 and was still off 25% as recently as last spring, he said. But he ended September with revenue only about 10% lower than before the pandemic.

Sales are also recovering at Zitomer, an upscale pharmacy and department store on Madison Avenue, said Sharon Sternheim, the store’s president. Prescription refills are about 80% of normal volume, an indication that residents are returning.

“Things feel a lot more normal now,” she said.

Sales are also recovering at Zitomer, an upscale pharmacy and department store on Madison Avenue, said the store’s president.

Manhattan’s hot high-end housing market will likely benefit retailers on Madison Avenue, said

Stephen Kliegerman, president of Brown Harris Stevens Development Marketing. After dipping 30% during the first year of the pandemic, sales near the shopping district are already 29% higher this year than in all of 2019.

Adelaide Polsinelli, vice chair of the commercial investment sales and leasing division at real-estate-services firm Compass, highlighted another positive:  Cheap real-estate prices are leading some Madison Avenue retailers to purchase their own buildings.

Akris, a Swiss luxury clothing brand, bought three properties for $45 million —about 80% lower than 2014 prices. Graff Diamonds bought the building next door to its Madison Avenue boutique for $43 million in January.  

Women’s fashion and home décor retailer Lizzie Tisch at her shop on the Upper East Side of Manhattan.

Ms. Tisch opened a pop-up store in a space previously occupied by luxury jeweler Cartier.

The avenue’s empty storefronts, meanwhile, prompted women’s fashion and home décor retailer Lizzie Tisch, who lives nearby, to open a pop-up shop in a space previously occupied by luxury jeweler Cartier. The store, which opened last November and was originally scheduled to close after three weeks, will remain through at least the end of the year.

“I would obviously love the opportunity to stay,” said Ms. Tisch.

Mr. Morelli with his daughter, Maris Leo, who is the jewelry company’s brand director.

Jeweler Paul Morelli said his landlord reduced the rent on his $50,000-a-month lease on Madison Avenue during the pandemic. His space includes a 1,000-square-foot boutique on the ground floor and a lower-level showroom for wholesale customers.

Mr. Morelli said sales at his Upper East Side store have nearly recovered after falling 35% during the pandemic, and direct sales of his jewelry through his website and studio in Philadelphia are booming. He wants to renew when his lease is up in 2024.

“Luxury shopping will never go away,” said Mr. Morelli. “Madison Avenue will always be Madison Avenue.”

Write to Kate King at Kate.King@wsj.com

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