FiDi doubles down on retail: Q&A, part I

From the December issue: Westfield’s World Trade Center complex may have gotten off to a wobbly start, but Lower Manhattan’s retail scene appears to finally be finding its footing. Brookfield Place’s $250 million revamp brought in luxury retailers like Hermes and Burberry, as well as a food hall that quickly became a favorite of local families. Westfield World Trade Center is now fully leased, according to a spokesperson, and Pier 17’s new 300,000-square-foot retail space is slated to open next year. Meanwhile, the area’s demographics have changed — decades of residential conversions and the recent wave of construction have established a critical mass of younger, well-to-do residents. The population has doubled since 2000, and a third of families in the area earn $200,000 or more, according to the New York State Comptroller. And financial services, once the district’s defining industry, now accounts for only 34 percent of total jobs in the area, compared to 56 percent in 2000. With that new demographic in mind, Whole Foods is set to open a new store at One Wall Street in 2018. “It’s a big deal,” said Susan Kurland, executive vice president and co-head of global retail services at Savills Studley [TRDataCustom]. And it’s not just families and office workers who are driving the retail scene — the district has seen a huge influx of tourists, with the WTC memorial bringing 14 million visitors to the area annually. The greater diversity Downtown has extended the shopping day, broadened demand, and created a unique retail mix distinct from Soho or Tribeca, according to industry observers. “FiDi stands on its own,” said Lee Block, executive vice president at Winick Realty Group. “It has its own daytime workforce population, its own residential population, and retail coming in to serve that population.”

For our first web installment, we turn to Michael Goldban of Brookfield Properties and Lon Rubackin of CBRE’s retail services group.

Michael Goldban

Michael Goldban
Senior vice president of retail leasing, Brookfield Properties

Between Westfield and Brookfield Place, should there be concerns about the luxury retail market becoming oversaturated?
Our projects are both unique and complementary, and our sales are strong. With both projects now online, awareness is up and foot traffic at Brookfield Place has sharply increased after the opening of the Westfield project.
With the much-talked-about struggles in the retail industry and the dominance of e-tailers, do you see rents softening in the FiDi?
Brookfield Place, with our free Arts Brookfield and community and experiential programming, has become a great complement to online retail. We don’t foresee any softening — in fact, we see physical and online growth going hand in hand. We are also now partnering and launching new technology platforms to complement our retailers and eateries, allowing for on-demand food ordering and tailored concierge offerings.

What kinds of shoppers are you targeting?
Office tenants of Brookfield Place — a workforce of about 50,000 — is increasingly eager to blend work and play. In response, we’ve implemented a placemaking approach, where office buildings are combined with retail amenities, top-tier dining options and year-round, curated arts and events in the Winter Garden and beside the marina.

What projects do you see as the biggest potential game changers for FiDi retail?
Saks Fifth Avenue opening at Brookfield Place. The addition of a luxury department store has helped to turn the area into a global hub for fashion.

Lou Rubackin

Lon Rubackin
Senior vice president, CBRE retail services group

How does the retail district differ from other Downtown areas like Tribeca and Soho?
FiDi is larger geographically. From Battery Park and Brookfield Place all the way to South Street Seaport, that’s bigger than Soho and bigger than Madison Avenue’s retail corridor. FiDi is just going to have more of everything, and it will be able to have pockets with different retail flavors.

What kinds of shoppers are FiDi retailers targeting?
There is no one answer. At Century 21, the anchor of retailing Downtown for almost a generation, the majority of the customers are tourists. Meanwhile, if you go to The Stores Down John Street and Liberty Street, they’re targeting the office workers and residential folks at night. Downtown is getting better all the time because it’s not relying on just one category: just tourists, just residents or just office workers.

Given the most recent lawsuit at Westfield WTC — the fifth — do you think retailers are getting cold feet? Is there enough demand to fill the mall?
Generally speaking, if a tenant backs out of a lease, that’s a major statement. However, nine times out of 10, it’s because the retailer is having financial problems. When a project is being constructed and won’t be delivered until some time in the future, a retailer’s fortunes can go up and down dramatically. As everyone knows, this project was delayed for a long time. For the time [retailers] signed the lease to the time they were required to open was likely two or three years. It’s easy to go out of fashion, and it can happen in a matter of months. As the center matures, retailers will have better feelings about going in and committing.

Between Westfield and Brookfield Place, is luxury retail market becoming oversaturated?
To me, Downtown is one of the most exciting places for retail in the entire city. You have a tremendous mix of high-end residential, an extremely strong tourist presence, and now Class A office. You never saw all three of those components at one time Downtown before. There is still room, not for everybody, but certainly for the best in class, and by that I don’t mean the most expensive.

Last spring, REBNY reported that asking rents for ground floor retail in the FiDi corridor increased 39 percent, to $326 per square foot, from the year-earlier period. What was behind the huge price jump and where do you see rents going?
The jump can be attributed to the overall positive events — office, residential and retail exploding. The people living there are all high-income earners, which is why BMW, Tiffany and Canali first went down there, and more and more companies are following. If you look at what $300 a square foot buys you in other parts of the city, retail rents Downtown are cheaper compared to areas like Madison Avenue, which can run up to $2,000 a square foot, or Times Square, where asking is $2,000 a square foot, or Meatpacking, which is asking $500, $600 or $700 a square foot. Even Hudson Yards, which isn’t built or open yet, is asking rents in the $400 to $500 range.

Can you talk about what impact the scheduled 2018 opening of Whole Foods at One Wall Street will have on the area?
It will have a huge impact for the 60,000 people living there. In the past, Whole Foods has tended to situate its stores in New York pretty far away from each other. But they have another store in Tribeca, at 270 Greenwich Street. The fact that they are willing to place these two stores so close together is telling you something about their confidence in the market. Add Whole Foods to Eataly a few blocks away [at 4 World Trade Center] and you’re starting to put together a best-in-class mix.