The Real Deal

• Email this article
• print
• Comments(1)

Sizing up Circuit City's space

Vacant Circuit City in Union Square

Finding new tenants for many of Circuit City's old stores is proving to be a challenge for the brokers and landlords who are marketing sites in Manhattan and Brooklyn.

After filing for bankruptcy at the end of last year, the electronics giant announced in January that it was going out of business, and by March it had shuttered all 567 of its stores nationwide, including nearly a dozen in New York.

Now, five months after that shutdown, four sites in Manhattan and three in Brooklyn remain vacant.

The spaces formerly occupied by Circuit City, which entered the New York market in 1997 and was one of a number of national mega-retailers to go belly up this year, are something of a case study of the New York City retail market.

Three of the spaces have been leased, while other sites have sparked interest from national companies that have toured the stores. Yet the vacant big boxes are coming onto the market at a time when there aren't a lot of new national chains looking to step in and fill the vacuum.

In May, P.C. Richard & Son took over Circuit City's old store in College Point, Queens, while Best Buy plans to open a store at the old Circuit City site at Gateway Center in Brooklyn in the fall. Both stores are reportedly 31,000 square feet. Best Buy will also be taking Circuit City's 46,000-square-foot Union Square space, it was announced late last month.

Retail brokers in New York say despite the fact that other replacement stores have not been announced, Circuit City's stores were in desirable and well-established shopping areas.

"They're all prime locations," said Faith Hope Consolo, chairman of retail leasing and sales at Prudential Douglas Elliman.

Nonetheless, the size of Circuit City's stores in the five boroughs does present a challenge, since there are only so many chains looking for big box locations right now.

Joanne Podell, an executive vice president at Cushman & Wakefield who specializes in retail, said: "It's certainly a challenge to do the kind of [sales] volume these stores" would need to do to make money.

While new tenants can expect to pay more than Circuit City did for spaces it leased in the 1990s and early 2000s, rents are down compared to what they were last year.

"In some high-profile corridors, rents are down 25 to 30 percent today versus a year ago," said Robin Abrams, an executive vice president at Lansco. "Conditions are prime for tenants who are opportunistic."

Here's a sampling of what's going on at some of the Circuit City sites:

Union Square

Circuit City's store in Union Square, on a high-profile corner at 14th Street and Fourth Avenue, had been the source of a great deal of buzz before being snapped up by Best Buy.

The site has a ground-floor entrance but is primarily located on the second floor, and P.C. Richard and Tommy Hilfiger were previously mentioned as possible tenants.

Joanna Rose, a spokeswoman for the Related Companies, which controls the site, said Best Buy would open in the fourth quarter of 2009.

"We've had tremendous interest," she added.

While Rose would not comment on rent figures early last month, Consolo, who is not working on the site, said Union Square has retained its rents better than most neighborhoods during the downturn because there are not many vacancies for large stores and because foot traffic is high there.

She said ground-level space in the area goes for between $300 to $350 a square foot, while second-floor space rents for $100 to $150 a square foot and lower-level space goes for $50 to $75 a square foot.

But Consolo said any tenant renting such a large space would presumably get generous incentives from an owner, including some free rent and money toward building out the space.

Upper West Side

A variety of retailers, including some with existing stores on the Upper West Side, have checked out Circuit City's old space on the corner of Broadway and 80th Street. (The jeweler Zales has a shop in the building, and Filene's Basement is nearby.) The landlord, Friedland Properties, is marketing the space.

It consists of 6,700 square feet on the ground floor, 6,700 in the basement and 10,000 on the second floor. Circuit City occupied the site for about eight years.

According to Friedland's Web site, asking rent is $2.75 million per year or $117 a square foot.

William Friedland of Friedland Properties said some of the retailers who have viewed the space were looking at all three floors, while others were looking to take only a portion of the 23,400 square feet.

There aren't many comparable spaces for lease in the immediate area, Friedland said.

"The space is somewhat unique," he added. "There are not a lot of available spaces on Broadway. We'd hope to have a lease signed within six months."

Meanwhile, last year Circuit City opened at a Millennium Partners property at 1965 Broadway at 66th Street, in a high-traffic corridor near Lincoln Center.

The 34,000-square-foot, two-floor space has gotten a lot of looks. Mango, Topshop, the Cheesecake Factory and CB2, a division of Crate and Barrel, have all toured the site, Consolo said.

The annual rent, nearly $4.3 million or $124 a square foot, made it Circuit City's most expensive lease in the city, according to DJM Realty, the Melville, N.Y., firm that handled local lease dispositions for the electronics chain.

"That's one of the very best locations Circuit City had," Consolo said. "Whoever takes it has to be well financed. It's not for the weak or undercapitalized."

Millennium declined to comment.

Upper East Side

On the Upper East Side, Robert K. Futterman & Associates is looking to fill 240 East 86th Street, between Second and Third avenues.

Circuit City's 17,000-square-foot space was on the lower level, but the entrance was at the street level; to get into the store, shoppers took an escalator downstairs. A Circuit City spokesman told the New York Times in January that the location "was a challenging space for us." He didn't expand on why.

Futterman is marketing the site with another space that sits directly above it that Barnes & Noble occupied until mid-June. Combining both sites would give a retailer 45,000 square feet, though according to Futterman's Web site, the spaces can also be divided.

Brokers from Futterman declined to comment.

Given its location in a heavily residential neighborhood, the site could attract a supermarket like Whole Foods or Trader Joe's, said Abrams of Lansco.

"That's a strong location and a good retail corridor that has withstood challenges in this economic climate," she said.

Midtown

Newmark Knight Frank is marketing the space that Circuit City occupied at 521 Fifth Avenue on the corner of 43rd Street. The 26,000-square-foot space, on two floors, has a renovated façade with more than 200 feet of wraparound frontage. Zara's and the clothing discounter H & M have stores nearby.

In 2006 or 2007, before Circuit City leased the site, asking rents were at least $450 a foot on the ground floor and $150 or $200 a square foot on the second floor, said Jeffrey Roseman, an executive vice president at Newmark.

Today's asking rents are $350 a square foot on the ground floor and $100 a square foot upstairs. While there's no lease out yet, many retailers including a number of clothing chains have checked out the site, Roseman said.

"We show it a few times a week. The interest is good," he added.

Brooklyn

In Brooklyn, at least three former Circuit City stores remain dark.

Forest City Ratner is marketing the electronics store's former site at the Atlantic Center Mall, in a high-traffic neighborhood near Downtown Brooklyn. Neighboring tenants include the discounter Marshall's, Old Navy, Target, Pathmark and Sleepy's.

Forest City Ratner did not respond to phone calls or e-mails seeking comment.

Meanwhile, the Botsaris Morris Realty Group says it's negotiating with a major national retailer who has taken out a lease on the Triangle Junction site — a 21,800-square-foot store on one level next to the main entrance of Target in the Flatbush neighborhood.

Circuit City opened its store there in 2008.

"We're hoping [to get a tenant that can] open in the fourth quarter," said Peter Botsaris, a principal with Botsaris Morris.

His company is also looking for a tenant for the former Bay Ridge store, which is a stone's throw from a sprawling and popular Century 21 and from several smaller national retailers along 86th Street, one of Brooklyn's busiest retail corridors.

Many large national chains representing apparel, "hard goods" and other types of retail have checked out the 35,000-square-foot, three-level space, Botsaris said.

The firm is asking $110 a square foot for ground-floor space.

"We're close to signing a lease," he noted.