While recent published reports suggest department stores are looking to enter or open new locations in New York City, the merchants themselves seem to be guarding their plans as cautiously as a dress size.
Retailers like Nordstrom and Macy’s are reportedly scouting new locations in Manhattan, looking for footprints large enough to serve their needs, and brokers are speculating on where those department stores could find space. Meanwhile, the new owners of Lord & Taylor said they might close its Fifth Avenue flagship and convert the property into condos or office space.
From Seattle to CPW?
A few brokers have said that Seattle-based Nordstrom was looking for its first New York City space, though they’ve said the company’s plans were long-term.
A report in the New York Times in October described serious discussions over a move by Nordstrom into a space at 15 Central Park West, a newly built condo tower at Broadway and 61st Street with 85,000 square feet of retail space. The story said the retailer determined it needed more space than what was available.
Amy Pobst, a spokeswoman for Nordstrom, said the store would “love to be in Manhattan,” but also that the company did not have any current plans to move to New York.
Karen Bellantoni, senior vice president at Robert K. Futterman & Associates, said she saw a place in Manhattan for Nordstrom, which she contends offers a stronger men’s collection than many of its potential competitors.
She listed a few places she could imagine a new department store like Nordstrom moving in, such as the renovated Plaza Hotel, which is turning condo with 160,000 square feet of retail space.
The grand opening for the retail space is scheduled for October 2007.
“The Plaza Hotel could probably put together a pretty sizable amount,” Bellantoni said.
Gary Trock, senior vice president of the retail group at CB Richard Ellis, wasn’t so sure that even the Plaza could handle Nordstrom, stressing that floor plan matters more than square footage. The Plaza, he said, was more likely to be split up into “an interior mall.”
So where might a new department store like a Nordstrom go in New York?
“I think they’d be great in Midtown or Downtown,” Bellantoni said. “If anyone was able to put together something in the Financial District, all day long that’s a great location for them,” she said, noting that the “office crowd” there overlaps almost exactly with Nordstrom’s clientele.
Macy’s uptown?
Moving north, Harlem is a hotbed of commercial activity, particularly retail. The New York Sun last month said a Macy’s department store may anchor Forest City Ratner and Abyssinian Development Corporation’s joint retail development at Lenox and 125th Street.
A representative from Macy’s declined to comment, saying the company only discusses store openings when they have been officially announced.
Richard Pesin, executive vice president at Forest City Ratner, said his firm did not “anticipate putting a department store there now.” The location currently includes a Marshalls and was recently renovated for a Staples.
Pesin said that Marshalls, which has 60,000 square feet of retail space, operates to anchor the site as department store would, with its size and range of merchandise.
Some big-box stores are also coming to East Harlem in 2008, such Home Depot, Target and Best Buy, when the East River Plaza, a joint project of Blumenfeld Development Group and Forest City Ratner, is scheduled to be completed. The site, on 116th Street and the East River Drive, is 70 percent leased, according to Pesin.
Possibly edging in…
Retailers’ interest in Harlem and Bloomingdale’s recent success in Soho may point to a trend that has department stores going to neighborhoods that were once fringe areas for that retail channel. When Bloomingdale’s opened its six-level Soho store in 2004, the New York Times said the 124,000-square-foot store was first new department store below 50th street in over 50 years.
With the acquisition of Manhattan Mall at Sixth Avenue and 33rd Street, which Vornado Realty Trust agreed to buy for $689 million in November, there’s been some speculation that a new department store may move into the location, which is a block away from Macy’s Herald Square.
The one-million-square-foot building with 164,000 square feet of retail space was built as the home of Gimbel’s department store, and later anchored by Abraham & Strauss and Sterns, both now closed. It currently has 60 retail stores, such as Aeropostale, Victoria’s Secret and Brookstone.
Vornado declined to comment, saying it was too soon after their purchase of the space to talk about their plans for it.
Possibly moving out
And then there’s Lord & Taylor. Richard Baker, the president of private-equity firm NRDC Equity Partners, which purchased the department-store chain in December, has said maintaining a Manhattan store is not a necessity. NRDC could move the store to another Manhattan location or it could leave the city completely. Renovating the 600,000-square-foot store in order to compete with other retailers could be cost prohibitive, industry observers said.
Gene Spiegelman, executive director of Cushman & Wakefield, points out that up until the 1980s, there were a far greater number of department stores in Manhattan, rattling off a list of stores like B. Altman and Bonwit Teller. If Lord & Taylor were to leave, Spiegelman said, “This would not be the first wave of department stores vanishing from the New York City streetscape.”
The stores that Spiegelman had listed were all “gobbled up for their real estate.”
Stores in a bubble
Department stores require massive amounts of space, which is expensive to hold on to. In strong real estate markets, stores have trouble making more money than their space is worth.
“What they’re facing is a strong market, where the value of space is more than what they can pay,” said Joanne Podell, a senior director at Cushman & Wakefield.
That kind of space serves not only as a drag on profits but also discourages stores from entering the market in the first place.
“It’s a big challenge. We’re talking about New York City,” said Podell about the difficulty of finding the “minimum 100,000 square feet” that a department store generally requires. Finding that kind of space is further complicated because building owners “can get more rent if they chop up the space,” she said.
Trock of CB Richard Ellis cautioned that Lord & Taylor’s fortunes may be waning, too, because of their Midtown location.
“South of 42nd Street has lost pizzazz with upscale shopping,” he said.
A comparison of the retailers’ merchandising strategies may also be a factor in their branding success.
Spiegelman said Lord & Taylor’s fate rests on brand recognition. The “name at one time resonated with the American consumer,” but these days he said it “lacks an iconic brand.”
Nordstrom, which started as a shoe store, is known for its fashionable shoes, as well as apparel for men and women, cosmetics, accessories and home goods. The store carries luxury designers and fashion labels like BCBG Max Azria, Calvin Klein and Diesel. The retailer operates 99 department stores in the U.S., in addition to about 50 discount stores and nearly 40 Fa onnable boutiques in the U.S. and Europe.
“A woman who’s 35 or over is probably more comfortable shopping in a place like Nordstrom” than at the Federated stores, Bellantoni said, referring to the parent company of Macy’s and Bloomingdale’s.