Vertical Victory for Time Warner Center?

The shops of the Time Warner Center are nearing their first anniversary, and as some outlets tally up numbers that surpass their sales projections, brokers are casting their first tentative votes for the success of the urban mall. There’s vertical retail traction in Manhattan even if some critics still say the shopping experience comes straight from the suburbs.

More than 90 percent of the 325,000 square feet of retail space was preleased to upscale shops and restaurants before the Center’s delayed February opening. One space in the six-floor arcade remains empty.

“There are three tenants we are negotiating with two are apparel, one is food,” says Webber Hudson, executive vice president at Related Urban Development, a division of The Related Companies.

The 80-story residential and commercial towers at Columbus Circle, built by The Related Companies and Apollo Real Estate Investors, created a retail hub in an area that was largely a commercial wasteland. The mall opened three months late, dogged by talk of past failures for vertical retail projects in Manhattan.

After betting big paying as much as $500 a square foot retailers have stuck it out and most appear to be thriving.

Tommy Todd, manager of Bar Masa, an offshoot of the exclusive sushi restaurant Masa, located on the fourth floor, was suffering a high waiter-to-customer ratio last summer.

But things have turned around, he said.

“We are doing quite well,” he said. “It’s what we hoped for. The customer mix is interesting. We have a lot of guests coming that work in the building or neighborhood. In addition, we’ve got people that live in the neighborhood and tourists.”

Retailers such as Tourneau, A/X Armani Exchange, Sephora, Williams-Sonoma and Borders Books and Music are also surpassing expectations for sales, according to brokers.

Litsi Yahes, manager of Tourneau, says the ground-floor store is seeing a conversion rate the percentage of people who actually make a purchase of about 20 percent.

Even stores on upper floors are moving enough merchandise to meet their targets, seeing more locals as customers than tourists.

“The store is doing well,” says Igor Credali, business analyst for Sephora, located on the second floor. “We’re on target.”

Third-floor audio equipment retailer Bose’s sales are at 160 percent of projections for the year, with about 750 customers visiting the electronics store daily and a conversion rate of 10.8 percent.

Even the expensive restaurants that set up shop under the eyes of a legion of critics to say nothing of discerning New York diners are reporting good results.

Brokers say the presence of the luxury Mandarin Oriental hotel invigorates the customer mix, adding tourists to a potential clientele of building residents, local office workers and nearby neighbors.

Top-notch restaurateurs were bought into the upper floors of the mall in the hopes that consumers would travel up to eat and shop on their way back down. Elite restaurants such as Jean-Georges Vongerichten’s V Steakhouse, Per Se, Caf Gray and Masa have gotten mixed reviews (four stars for Pe Se from the Times, three unofficial stars for Masa and one for Bar Masa, two for Caf Gray and one for V Steakhouse.)

“As it pertains to the restaurant side, it’s a smashing success,” says Alan Napack, director of retail services at Cushman & Wakefield.

But in a food-obsessed city, the Time Warner Center may owe its success to Whole Foods, a trendy health food store.

“To me, Whole Foods was a stroke of genius,” says Napack, who negotiated leases for A/X Armani Exchange and Blair Delmonico. “It’s just bringing a ton of people into the center.”

Napack said he recently spent 20 minutes at the checkout line there, but continues to brave the crowds. Many shoppers are making the trip across town for premium groceries, he says.

The Time Warner Center “was probably one of the only vertical spaces in Manhattan that was actually thought out. It wasn’t an afterthought,” he says. The retail space was the work of developer Ken Himmel, president and chief executive officer of Related Urban Development, who specializes in development of urban vertical shopping centers and whose work includes the eight-story Water Tower Place in Chicago.

Though the mall omits a pedestrian movie theater a fixture of suburban malls it is instead home to Jazz at Lincoln Center on its fourth floor.

“Things like that are a little bit out of the box,” Napack says. “They are going to bring people through the center all the time.”

Faith Hope Consolo, vice chairman of Garrick-Aug Associates, says other vertical malls, such as the Trump Tower, Herald Center and A & S Plaza, suffered because New Yorkers don’t have time to travel upward.

“There’s no reason to go inside and upstairs, there are so many choices at street level,” she says. “But let’s remember the vertical retail that did work: that was the World Trade Center, where you had 100,000 people passing your door every day.”

Prices for retailers at the Time Warner Center are somewhat high for Manhattan. Napack says the last deal he did at the Time Warner Center was a ground floor lease at $350 per square foot.

According to Hudson, leasing rates vary broadly but top out at $500 per square foot.

The average retail rent in Manhattan is $150 per square foot, but Fifth Avenue rents are as high as $1,400 per foot, while the financial district bottoms out at $75 per foot. Marquee shopping drags such as Madison Avenue and 57th Street see rents of $800 per square foot, Consolo says.

She believes the Shops at Columbus Circle need to check their post-holiday results before success can be ascertained.

“Until we see the project mature, we really don’t know,” she says. “So let’s revisit it after the first quarter of this year.”

Developers are more inclined to an outright declaration of victory, claiming average retail sales per foot of “well in excess of $1,000,” Hudson says.

That may lead to even higher rents in a new year they predict will continue to see strong sales, especially with the initiation of a multimillion-dollar marketing campaign reaching far outside the mall’s established trade area.

“When we analyze rent as a percent to sales, there is a lot of room for rents to grow,” Hudson says. “As for sales, we see no reason for sales to soften.”

The Real Deal