Clockwise from top left: World Trade Center site, Port Authority Bus Terminal, South Street Seaport, Hudson Yards, World Financial Center and Farley Post Office/Moynihan Station
“Mall” has been a four-letter word in the Manhattan retail world for some time now. Despite that, Manhattan property owners have begun to — or are planning to — rehab and build a historic amount of large-scale retail over the next few years.
Currently, developers such as the Westfield Group, Brookfield Properties, the Related Companies and Vornado Realty Trust have more than 2.5 million square feet of retail space under construction, or at least on the drawing board, in mall-like projects south of 59th Street.
If all of what’s planned gets built, it would be the greatest amount of large-scale retail space ever delivered in Manhattan during a five- or six-year period, a review of prior development by The Real Deal shows.
Brokers differed on what impact such a large amount of space would have.
“I believe it will have a huge positive effect on New York,” said Joanne Podell, executive vice president of retail at Cushman & Wakefield, noting that the borough is still short of retail locations.
But Bob Grayson, a retail consultant with the Grayson Group, said if all the locations get built, it could put downward pressure on leasing prices.
“There is no question; if all that space does come on the market, it should have an impact on the rents that [landlords] can command, because they’ll be slinging it out, probably for similar tenants,” Grayson said.
The first major retail project that’s slated to come online is the approximately 200,000-square-foot rehabbed space at the World Financial Center. The next, which is slated to debut in 2015, is the World Trade Center, with about 365,000 square feet of retail.
Further uptown, two enormous but still-uncertain plans are in place, for approximately 750,000 square feet at Related’s Hudson Yards and about 750,000 square feet at the Farley Post Office.
Meanwhile, the smaller, 130,000-square-foot Port Authority Bus Terminal is open now, but is undergoing a renovation. And finally, South Street Seaport properties, with nearly 300,000 square feet of retail, are also open, but brokers expect them, too, to be reimagined and re-tenanted.
Not all of the space is new — the owners of the World Financial Center are spending $250 million to rehab the existing retail space there in phases (the mall will stay open during construction). And, while not complete, the reimagined space is in competition to lure in tenants today.
But building mall-like space in Manhattan is not a sure thing.
The borough is littered with examples of failed attempts at malls — from the Manhattan Mall, which relaunched as an urban mall in the 1980s, but ultimately saw its retail space rehabbed and reduced in size to find success, to the World Financial Center itself.
However, there are examples of success too. Case in point is Related’s Time Warner Center, which opened in 2004 and now has 400,000 square feet in its Shops at Columbus Circle. Also, the World Trade Center had rising rents and waiting lists for retailers when it was destroyed in 2001.
Jeffrey Roseman, an executive vice president with Newmark Knight Frank Retail, said there were “probably more than 75 retailers that have [stores with] more than 50,000 square feet in Manhattan.”
While brokers don’t believe the new locations signify a sea change for retail (at least when it comes to drawing consumers away from storefronts and into urban malls), the planned construction appears to demonstrate a confidence in Manhattan shopping even as dark economic clouds have gathered again on the horizon.
Every broker interviewed repeated the mantra as if on script: “Manhattan is under-retailed.”
Demand from tenants has increased cautiously since the uneasy recovery began. Many healthy companies are now telling their real estate departments that they are “open to buy,” a term used in the shopping center trade world when a company wants to find more locations.
Also, major retailers that lack locations in Manhattan, such as Nordstrom and Kohl’s, both reported strong second-quarter earnings last month.
“It is mixed, cautious. It’s a slowly increasing curve,” said Chase Welles, executive vice president at Northwest Atlantic, of demand for new stores.
Welles represents big-box tenants such as Staples and Whole Foods.
Once potential tenants do decide to make a move, they’ll have plenty of options. Here’s a closer look at some of the in-the-works projects.
World Financial Center
Another potentially enormous project, the expansion of Pennsylvania Station into the Farley Post Office building just to the west, would add as much as 750,000 square feet of retail in the Beaux Arts building.
The project, to be named in honor of late U.S. Senator Daniel Patrick Moynihan, would create a new retail destination to bookend vibrant West 34th Street. However, it’s by no means certain. Vornado and Related, which partnered to strike a deal with the state in 2006 to develop the retail, face a year-end deadline to solidify the financial terms.
Furthermore, three avenues to the east are two malls that provide cautionary tales to retailers. The Manhattan Mall and the Herald Center, both within spitting distance of Macy’s on Sixth Avenue at 34th Street, were reimagined in the 1980s, but failed and were recreated in scaled-down forms again in subsequent years.
Yet in the project’s favor is the massive amount of commuter foot traffic in the area. In 2010, Penn Station was the busiest transportation facility in the country, with 600,000 passengers daily.
The first phase of the project broke ground last fall and focuses on the transportation infrastructure. The retail post office will remain in place on the Eighth Avenue side of the building, with new entrances for commuters to ease congestion into Penn Station.
The retail development — which Vornado and Related are doing with the property owner, Empire State Development Corporation, and in consultation with the Port Authority — is part of the project’s second phase, which could include a hotel or other amenities. That has not yet started.
One set of plans from the state’s Moynihan Station Development Corporation shows a possible street-level layout with seven spaces comprising more than 106,000 square feet of retail, including blocks of “destination retail” on the Ninth Avenue side of the building. It also shows blocks of up to 50,000 square feet on other levels in the six-story building.
“That is a great building,” Grayson said, referring to the 1912 McKim, Mead & White icon.
“It starts with heritage. If you put [in] the right kind of tenant, it can be really exciting,” he said, pointing to examples in historic buildings such as Chelsea Market.
Port Authority Bus Terminal
The Howard Hughes Corporation, which owns the Seaport, is keeping a tight lid on its plans for the nearly 300,000-square-foot site. The site is comprised of four properties in Lower Manhattan, including the Pier 17 Pavilion and the Fulton Stall Market.
Insiders said the retail destination, which was caught up in the bankruptcy of former owner General Growth Properties, will have a more active food component, and possibly a large anchor tenant, once it is reintroduced to the market, possibly in the coming months.