A home store fire sale is ablaze in New York City. Retail space once occupied by defunct furniture chains Bombay and Domain, as well as home merchants now viewed as passé, such as Pier 1 Imports and Straight from the Crate, is either changing hands or has come on the market.
Retailers ranging from apparel merchants to drugstore chains, restaurants and gourmet grocers could set up shop in the former home stores.
But retail vacancies could also be filled by a new wave of hipper, hotter and in some cases more upscale home retailers such as West Elm, CB2, the Container Store and Gracious Home that appeal to the city’s increasingly young and affluent population, brokers said.
Nationwide, the meltdown in the housing sector has hobbled home furnishings retailers, a situation likely to be made worse as Wall Street’s latest woes hit Main Street. And in New York City, the sector’s troubles have been exacerbated by rent increases so steep they are prohibitive for stores selling home goods, which generate lower profit margins than apparel, for example.
Beyond the retailers who are liquidating stores nationwide this year, such as Bombay, Domain and the Sharper Image, other home retailers are questioning whether it’s financially viable to remain in the Manhattan market. And the answer, increasingly, is no.
“They are faced with lease renewals and the rent increases are often high for them to pay, so they end up closing stores, relocating or consolidating locations,” said Andrew Mandell, a broker with Ripco Real Estate.
Languishing in the middle
As the middle class is being expunged from a city increasingly built for affluent residents, mid-level retailers are, too, brokers said.
“In Manhattan, you have a sophisticated customer base looking for something unique,” said Robin Abrams, executive vice president of Lansco Corp. “These days, that crowd views Pier 1 Imports and Bombay the way they would view a chain restaurant. They wouldn’t go to Houlihan’s because they have other alternatives. It’s a different shopping mentality.”
As a result, a bifurcation of the market has occurred. “You have two extremes. The customer on a limited budget who is shopping frugally is shopping in the suburbs” for home goods, Abrams said.
With both home and apparel retailers in the city, “now everything is cheap-chic and luxury,” said Faith Hope Consolo, chairman of the retail leasing and sales division of Prudential Douglas Elliman. “There is no middle market.”
The last two Pier 1 Imports stores in Manhattan are on the market.
However, the retailer “has not made the decision to leave either store,” said spokesperson Kelly Keenum. “We would love to stay in both stores if it proves economically feasible.”
The Pier 1 Imports store at 1550 Third Avenue at 87th Street, whose lease expires in 2010, is being eyed by bank branches, restaurants and apparel merchants, at an asking rent of $250 per square foot.
That’s a far cry from the $40 to $60 a square foot Pier 1 Imports signed on to pay when it first leased the space in 1992, said Jedd Nero, executive vice president of retail services for CB Richard Ellis, who brokered the original lease.
Meanwhile, Robert K. Futterman has been retained to start an early marketing campaign to secure a new tenant for the Pier 1 Imports at 71 Fifth Avenue and 15th Street when that lease expires in 2012.
The space could go to an apparel retailer along the lines of Zara, H&M or the Gap, or an international merchant like Top Shop that would appeal to students at nearby New York University and the New School, said Mark Lapidus, a managing partner with 71 Fifth Avenue LLC, the majority owner of the building that houses the store.
The home departures have been especially pronounced on Broadway’s home furnishings row in the Flatiron District (see story on page 142).
Both 900 and 936 Broadway (spots formerly occupied by Bombay and Domain, respectively), are on the market.
The former Bombay store, with an asking rent of $130 per square foot, could be leased to an apparel retailer by the end of the year, said Sam Stein, a broker with Justin Management who is handling the location.
When Domain first signed a lease in 2000 near Lincoln Center, that area was expected to blossom into a destination for home retailers.
At the time, Domain and Ethan Allen Interiors each opened stores in the luxury towers at 101 West End Avenue at 65th Street.
But the area never took off as a destination for home stores, said Mandell, who first leased the spot to Domain. Domain and Ethan Allen each shuttered those stores this year.
The Domain spot is ripe for a drugstore, bank branch, gourmet grocer, gym or yoga studio, Mandell said. “It’s an area in transition with a lot of residential development and there will be services needed.”
For its part, the Sharper Image — a chain that sold grown-up toys for the home, such as vibrating armchairs — was stuck in a time warp, still selling the entertainment of the 1990s as the Apple-type stores were capturing the imagination of shoppers, Consolo said.
The Manhattan locations for the now-extinct chain are a broker’s dream. “All the stores they’re vacating are in prime real estate with very high tickets [rents] from $500 to $800 a square foot,” Consolo said.
These include a store in Rockefeller Center and one at the South Street Seaport that could be scooped up by Juicy Couture, American Eagle or American Apparel, she said.
Local mom-and-pop home stores like Straight from the Crate are also being nudged out. The entry-level furniture store has closed six stores in the past two years, and only two stores in the chain remain.
“It’s very hard for mom-and-pops to survive with escalating rents,” said Nero, who is looking to find a new tenant for the Straight from the Crate store that closed this year at 50 West 23rd Street.
New kids on the block
The home store exodus isn’t just making room for fashion — it has paved the way for the next generation of merchants selling furniture, bed linens and coffeemakers.
Although these stores may not yet be filling the precise spots being vacated by the departing chains, retailers such as West Elm, Gracious Home, CB2 and the Container Store are providing a fresh alternative to home retailers that had lost their luster and didn’t keep step with changing tastes, brokers said.
As Domain exits the Upper West Side, West Elm, with its young, trendy, modern aesthetic, is making its debut nearby in the Zeckendorf building at 15 Central Park West between 62nd and 63rd streets. The building is said to be drawing the likes of celebrities such as Denzel Washington, Sting and Bob Costas, said Mark Finkelstein, president of Retail Strategies, who brokered the lease.
Rents in the area are an estimated $400 per square foot, brokers said.
West Elm already operates stores in Chelsea and Dumbo.
Whereas Domain appealed to an older customer and grew stodgy, West Elm “came up with a furniture line and product mix that is affordable yet youthful and has a modern edge to it, which seems to be more appealing these days,” Mandell said.
Just as Williams-Sonoma birthed a hipper, younger spin-off with West Elm, Crate & Barrel has spawned CB2, a lower-priced, contemporary sub-brand that is spreading its New York wings.
CB2 opened its first New York store in Soho last year and is scouting for another Manhattan location.
Young people just starting out in the city, who formerly might have gone to a store like Straight from the Crate, now “have a tendency to be drawn to name brands with a little bit of a hip factor” like CB2 or West Elm, as well as the Container Store, Mandell said.
The storage emporium “is looking [to expand] all over the city,” Consolo added.
High-end home merchants are also branching out. Upper East Side fixture Gracious Home is making its Chelsea debut in October.
Gracious Home “is really tailored to the market,” Consolo said.
Indeed, the store will open in the Chelsea Landmark on Sixth Avenue between 25th and 26th streets, a new 38-story residential tower that sits smack in the center of one of the city’s densest luxury apartment booms.
What’s more, Williams-Sonoma will bring Williams-Sonoma Home, its newest, toniest furniture concept, to Manhattan with a store in the Time Warner Center, Finkelstein said.