Industry Leaders See Room To Grow for Retail

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The New York Sun

Over the next few years, retail sales are expected to grow, and a number of prominent real estate executives said the city is underserved and can absorb more retail space in the coming years.


Appearing at a luncheon panel of the 38th annual NYU Capital Markets Forum at the Waldorf Astoria last Thursday, the chairman of the Related Companies, Steven Ross, who co-developed the Time Warner Center, said, “More than 18 million people have visited the center this year. The average sales per square foot are exceeding $1,200 per square foot, far in excess of what we ever expected. Initially we had doubts about the success of the retail portion of the center, hedging our bets, and decided to sell 49.5% of the retail space to California Employees’ Retirement System. Next year we plan to open additional restaurants and shops on the third and fourth floor.”


The president of Vornado Realty Trust, Michael Fascitelli, said that annual sales at the H&M retail store at their office building at 640 Fifth Ave. and West 51st Street are in excess of $45 million. “They have difficulty in restocking the shelves to meet the customer demands,” he said. Meanwhile, retail sales are exceeding expectations at Vornado’s recently completed 731 Lexington Ave. More than 95% of the retail space has been leased, and Vornado is bullish on the retail environment in Manhattan.


Last May it purchased the retail condominium of the former Westbury Hotel, occupying the entire block of Madison Avenue between 69th and 70th streets, for $113 million. The site contains about 17,000 square feet of retail space, fully occupied by luxury retailers including Cartier, Chloe, and Gucci. The purchase price of about $6,647 a square foot is possibly the highest ever paid for retail space in America. “People said we were crazy to pay that price,” Mr. Fascitelli said. Recently Vornado has received unsolicited offers from $130 million to $150 million for the site.


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“We are planning an expansion of close to 600,000 square feet at Gateway Center in the East New York section of Brooklyn,” Mr. Ross said. In the fall of 2002, the Related Companies and Blackacre Capital Partners opened the 640,000-square-foot retail shopping plaza known as Gateway Center on a former waste landfill off the Belt Parkway. Tenants include Home Depot, Target, Marshall’s, Bed Bath & Beyond, Old Navy, Circuit City, and BJ’s Wholesale Club, as well as Red Lobster, Olive Garden, and Boulder Creek Steakhouse. It was the first large-scale retail development in Brooklyn since Kings Plaza Mall opened in 1970.


“Sales are far exceeding our expectations on 14th Street and Union Square,” Mr. Fascitelli said. In November 2004, Vornado redeveloped 4 Union Square, the former home of the Manhattan branch of May’s Department Stores and Bradlees. The site includes a three-level Whole Foods Market – which has annual sales in excess of $60 million – Filene’s Basement, DSW Shoe Warehouse, and Forever 21.


In a few months, a 15,000-squarefoot Trader Joe’s Foods Market will open its first store in New York City. The store will be located at 140 E. 14th St. in the ground-floor retail space of NYU’s Palladium residence hall. Today the grand opening of a new Balducci’s Market will be held at 14th Street and Eighth Avenue in a 21,000-square-foot space in the historic New York Savings Bank building.


Whole Foods Markets plans to open at least two new stores in Manhattan. Next year, a 75,000-square-foot duplex store, the chain’s largest in the Northeast, will open at the residential rental development, Avalon Chrystie Place, at 229 Chrystie St. and Houston Street on the Lower East Side. Early next year, construction is scheduled to begin at Edward J. Minskoff’s mixed-use residential and retail development on Greenwich Street, which will include Lower Manhattan’s first Whole Foods and a Barnes & Noble Superstore.


In September, the Related Companies met with members of Community Board 4 in the Bronx to discuss the Gateway Center, a proposal to redevelop a 26-acre portion of the current Bronx Terminal Market site along with an adjacent parcel currently housing the Bronx House of Detention. The project would include about 1.1 million square feet of retail, multilevel parking, and a 250-room hotel. The project would house five large-scale big-box, specialty, and smaller retail stores occupying about 755,000 square feet of the site with parking for 3,000 cars. The project site is situated on the east side of the Major Deegan Expressway just south of Yankee stadium, which is owned by the state Department of Transportation.


In the spring, New York City will have its first “lifestyle center” in Glendale, Queens, developed by Atco Properties and Management. The shops at Atlas Park will feature 60 stores and restaurants in 300,000 square feet of space for retail and office tenants. Tenants include Regal Cinemas, Coldwater Creek, Johnny Rockets, California Pizza Kitchen, the Bombay Company, and others. Last week, Borders signed a lease for a 21,000-square-foot bookstore, its first location in Queens.


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Vornado owns 33% of the common stock of Alexander’s and manages its real estate business. In 1995, it acquired a controlling interest in Alexander’s after it emerged from bankruptcy protection. Today Alexander’s is a real estate investment trust that owns, manages, and leases six properties in New York City and New Jersey. Last year the company completed the mixed-use retail, office, and residential complex at 730 Lexington Ave., on the former site of Alexander’s. Next spring, on the site of the parking lot adjacent to the former Alexander’s Department Store in Rego Park, Queens, construction is scheduled to begin for a mixed-use development, which will include 600,000 square feet of retail in the basement and on the first, second, and third levels; 400,000 residential apartments, and parking for 1,500 cars. About 85% of the space has been leased, a source told The New York Sun. Century 21 Department Store plans to open a 135,000-square-foot store on the site.


In July the New York City Economic Development Corporation announced the selection of Flushing Commons LLC to redevelop Municipal Parking Lot 1, a five-acre, city-owned site in downtown Flushing in Queens. The privately funded, $500 million project calls for the creation of a new town square, about 500 residential units, 350,000 square feet of retail space, a business-class hotel, community center, recreational facilities, and new parking.


On April 19, a groundbreaking ceremony was held for the Bricktown Centre retail center in the Charleston section of Staten Island on the Southwest Shore, bounded to the south and east by Veterans Road. The new retail center will include Home Depot, Target, and Bed Bath & Beyond, as well as other retail and restaurants. Blumenfeld Development Group and the retailers plan to invest more than $100 million in the development, including $15 million for acquisition of the 42-acre site from the city. The project will contain about 400,000 square feet of retail space and parking to accommodate more than 1,700 cars.


Early next year, Blumenfeld Development Group and Forest City Ratner Companies plan to begin construction of East River Plaza, on the site of the former abandoned Washburn Wire Factory in East Harlem. The site runs from 116th Street to 119th Street along the FDR Drive. According to industry sources, major tenants will include a Home Depot and a Costco, Manhattan’s first.


Retail developments are planned for every borough of the city. A senior director at Cushman & Wakefield, Joanne Podell, said, “There are also several trading areas where there is already enough density to benefit from additional retail. Times Square with its 12 million square feet of office has a real need for the retailers that will serve the office community.” Office and residential growth is boosting demand for the development of quality retail throughout the city.



Mr. Stoler is a television broadcaster and senior vice president at First American Title Insurance Company of New York. He can be reached at mstoler@firstam.com.


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