Pier 1 bids Manhattan stores farewell, brokers say

By Barbara Thau | September 15, 2008 01:52PM

Pier 1 Imports is poised to exit the Manhattan market, brokers said.

The retailer that brought globally-sourced home furnishings and wicker and rattan looks to the Big Apple is set to see its lease expire at 1550 Third Avenue at 87th Street. That lease is slated to expire in 2010.

At the same time, Robert K. Futterman has been retained to start an early marketing campaign to secure a new tenant for the Pier 1 space at 71 Fifth Avenue at 15th Street. The lease for that location expires in 2012.

“We are actively pursuing specific retailers for that spot,” said Mark Kapnick of Robert K. Futterman, who is brokering the lease for the Fifth Avenue store. “There is no option [for Pier 1] to renew the lease at that location at the end of their term” in 2012.

While the company would welcome a new proposal from Pier 1 when its lease expires, “I don’t think their sales can support the rent in that market,” he said.

Kelly Keenum, spokesperson for Pier 1 Imports, maintained the home decor chain has no plans to exit the Manhattan market.

“Futterman may have been retained to secure a new tenant at the 71 Fifth Avenue location but that is not because we have any desire to leave that location,” Keenum said.

She added: “We have not made the decision to leave either store. We would love to stay in both stores if it proves economically feasible.”

Times are tough for home furnishings retailers, who are buckling under the weight of the housing crisis and sputtering economy.

“Margins are very tight” for home retailers, said Jedd Nero, executive vice president of the retail services group for CB Richard Ellis, who is brokering the lease for Pier 1’s Upper East Side location.

“It’s not financially beneficial for them to stay,” echoed Mark Lapidus, a managing partner at 71 Fifth Avenue LLC, a majority owner of the building that houses the 15th Street store.

On the Upper East Side, the asking rent is $250 per square foot for the Pier 1 space. The store paid about $50 a square foot when it first leased the space in 1992. Bank branches, restaurants and apparel merchants have so far expressed interest in the location.

When Pier 1 signed the lease for space downtown at 71 Fifth Avenue in 1992, rents in the area were $40 to $60 a square foot. Today, asking rents in the area are as high as $400 a square foot.

Because 71 Fifth Avenue’s mortgage is paid off, the company can afford to set a lower rent than other landlords in the area, Lapidus said. That means the building is willing to secure a tenant for as low as $250 per square foot.

The location gets heavy student foot traffic from nearby New York University and the New School just blocks away, so the building is searching for a retail tenant like Zara or H&M to appeal to that crowd, Lapidus said.

Pier 1’s potential impending Manhattan exit reflects a store concept that seems passé when compared to merchants such as West Elm and Crate & Barrel, brokers said. 

“There’s too much competition in [the home] market. Pier 1 has gotten outdated,” Lapidus said. “They also over expanded and opened way too many stores too quickly.”

Indeed, on a national scale, the retailer has closed over 100 stores over the last 18 months. Meanwhile, the two other stores in New York City — one each in Flushing, Queens and St. George, Staten Island -– are not slated to close.