Williams Sonoma bringing ottomans to outer boroughs

Soon more residents of the outer boroughs will be able to shop for
upscale home furnishings in their own neighborhoods, just like
residents in Manhattan, who will also be getting even more venues to
buy leather club chairs and cashmere baby clothes.

Williams-Sonoma Inc., the parent company of several furniture and
housewares brands like Williams-Sonoma, Pottery Barn and West Elm, is
known for being one of the first retailers in Soho and sniffing out
emerging neighborhoods. It has embarked on an expansion of its brands
in New York City.

Some of the brands are new, such as Threads, a test store for upscale
children’s clothing. The company is also planning on opening its first
New York City location for Williams-Sonoma Home, a recent spin-off
brand, on either 59th Street near Bloomingdale’s or in the Flatiron
District next year, said Mark Finkelstein, president of Retail
Strategies and Williams-Sonoma’s broker.

The retailer also plans to bring West Elm, a furniture chain aimed at younger consumers, to the Upper West Side.

Beyond Manhattan, look for Pottery Barn to make its Brooklyn debut in
either Brooklyn Heights, Cobble Hill or Park Slope in late 2008 or
early 2009. Queens and Harlem could also be on tap, Finkelstein said.

The store openings follow Williams-Sonoma’s time-tested real estate strategy.

The San Francisco-based company, which has $3.8 billion in revenue and
is the fifth-largest retailer of home goods, is notoriously
rent-sensitive. It cushions the blow of high New York rents by placing
stores on less-expensive side streets and by pioneering uncharted
territory, making it an early entrant into both Soho and Dumbo in
Brooklyn.

The retailer declined comment for this story.

Threads builds on Williams-Sonoma’s bid to broaden its portfolio of
home concepts. The test store is based on children’s apparel sold at
Pottery Barn Kids and is located at 1551 Second Avenue at 76th Street,
mere blocks from Pottery Barn Kids. That’s an example of a classic
Williams-Sonoma strategy — clustering complementary retail brands just
a few blocks apart.

The Threads store used to house Chambers, the now-defunct
Williams-Sonoma brand, reflecting Williams-Sonoma’s practice of
recycling its stores to test new concepts in secondary locations as
opposed to using new, prime real estate, said Robin Abrams, executive
vice president at the Lansco Corp.

Second Avenue in the East 70s has blossomed into a destination for
kid’s clothing, with retailers such as Talbots Kids and Lester’s,
Abrams said. Retail rents on Second Avenue in the 70s average between
$150 and $200 a square foot.

Life in Bloomie’s Country

The retailer faces pricier rents in what’s been called “Bloomie’s
Country” on Third Avenue in the 50s — for its tony Williams-Sonoma
Home concept, which sells mother-of-pearl-handled cheese servers and
custom-upholstered couches.

Rent in that neighborhood is around $250 to $300 per square foot.

In addition to longtime marquee fixture Bloomingdale’s, the area is
home to more recent tenants such as the Home Depot, Ethan Allen and
Domain.

A spot for Williams-Sonoma Home near the Decoration & Design
Building, at 979 Third Avenue, which houses over 100 upscale home
showrooms, is ideal, Finkelstein said.

The retailer “works closely with the decorators and designers in the D
& D Building and also serves as an alternative to the design
showrooms,” he said. “If they move into the D & D area, they’ll get
the designer and decorator business, the tourist traffic that comes
from all over the world to shop in that neighborhood and the
bridge-and-tunnel crowd,” said Faith Hope Consolo, chairman of the
retail leasing and sales division at Prudential Douglas Elliman.

The retailer will also likely consider side streets, possibly angling
for a spot on 59th Street off Lexington or Third avenues to shave costs.

It currently operates a Williams-Sonoma kitchenware store and a Pottery
Barn Furniture Store On 59th Street near Lexington Avenue, and a West
Elm furnishings store on 18th Street.

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“Side streets are half to a third of the rent of a major avenue,”
Abrams said. “It was unusual for a national chain to go on a side
street.”

Farther downtown in the Flatiron District, another possible location
for Williams-Sonoma Home, rents are even steeper. They range from $400
to $500 per square foot on Fifth Avenue and are about $300 per square
Foot On Broadway by ABC Carpet, sources said.

Like “home furnishings-centric” 59th Street, the Flatiron District is
dotted with stores like Design Within Reach, Waterworks and Ann Sachs
Tile & Stone.

In both neighborhoods, Finkelstein said, “It’s about finding the right
opportunity and affordability. They need to show profitability at the
bottom line.”

Although the cost of doing business in New York is high, so is the potential payoff.

“The New York stores do well,” Finkelstein said. The Williams-Sonoma,
Pottery Barn and West Elm brands can generate volume of roughly $1,000
to $1,400 per square foot in New York, sources estimate.

West Elm branches out

Emboldened by the success of West Elm stores in Dumbo and Chelsea,
which offer more moderately priced furnishings, the retailer is looking
to open a third New York City unit on the Upper West side in the
Lincoln Center area.

The retailer also operates catalogs and Web sites for its brands, which aid it in choosing new locations.

“Williams-Sonoma has a tremendous advantage with all their catalogs,”
Finkelstein said. “Their demographic maps show where each sale came
from in each zip code. [That tells them] where they’re missing a store
and where a store would be good.”

To that end, the retailer is scouting locations for Pottery Barn in
Brooklyn Heights, Park Slope and Cobble Hill, where rents range from
about $100 to $150 per square foot, Finkelstein said.

And a store in the Forest Hills section of Queens could come down the pike, he said.

“The boroughs have long been underserved. There is a big population there with buying power,” Abrams said.

Finding the next hot spot

Brokers said Williams-Sonoma has a good nose for sniffing out emerging neighborhoods and underserved areas.

“They’re very good at selecting locations ahead of the curve,”
Finkelstein said. “In Soho they were one of the first on Broadway and
Houston — it was a very cheap deal then. They could never have
afforded it today.”

The same is true of 86th Street and Madison Avenue, where
Williams-Sonoma opened a Pottery Barn about 15 years ago. At the time
86th Street, with its mom-and-pop stores, was a nondescript
neighborhood considered too far north for high-profile commercial real
estate.

Today, Carnegie Hill is filled with chic restaurants, national
retailers like Borders and new residential development, Consolo said.

Will Williams-Sonoma continue north to Harlem? “I hear they’re looking
at 125th Street,” Consolo said. Don’t be surprised “if in the next year
or 18 months they lease something up there.”