Sizing up Circuit City’s space

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.