Times Square Faces An Identity Crisis As Rents Fall And Retailers Bail
In its quest to attract visitors, Times Square is reverting to a sanitized version of its former self.
Can you offer an experience? That’s what landlords in Times Square want to know if you wish to work there. It may seem like flashback to the job requirements during the seedier days of the renowned retail and entertainment junction in Manhattan. In a way, it is. Conventional shopping is out, taken over by Amazon. Businesses now have to offer something that require customers to show up in person for a once in a lifetime experience. Or at least, once in a lunchtime.
Taking a leaf out of their Broadway brethren’s playbook, businesses new to the area are offering things that can’t be shipped to your door.
“What matters is entertainment and food,” Laurent Morali, president of Kushner, told the Wall Street Journal. In 2015, Kushner bought the retail condo covering 51/2 floors at a former New York Times building on West 43rd Street. It recently signed leases with tenants to bring an 11,970-square-foot food hall curated by chef Todd English—a 60,000-square-foot interactive exhibit from National Geographic called ENCOUNTER: Ocean Odyssey and a 49,000-square-foot miniature world called Gulliver’s Gate. “That was our focus from the second we toured the property to the second we finished leasing it up.”
The threat from Amazon can’t be overstated. There’s been a drop in rents this year and retailers have balked at the exorbitant cost of doing business at the “Crossroads of the World”. Ironically, it was the escalating rents last year that caused two of the most “experiential” retain outlets “Toys R Us” and FAO Shwartz (which owns T.A.U.) to leave in 2015.
Shwartz famously had six-foot stuffed giraffes and a danceable piano. Toys R Us had a 60-foot-tall indoor Ferris wheel with themed cars, a 20-foot-tall robotic T. Rex that swiveled and roared at shoppers, and a 4,000-square-foot Barbie dollhouse. They were the definition of a retail experience. So what happened?
“The real problem is the margin on the product,” Lee Peterson, executive vice president of brand, strategy and design at WD Partners told Forbes after the shuttering. “Apple doesn’t seem to have an issue with high rent. … If Toys ‘R’ Us would spend more time on proprietary product and innovation in general, they’d have less trouble paying rent in any of their locations. It’s just another sign of the death of the warehouse concept. Or, better put, the migration of the warehouse concept to clicks vs. bricks.”
“Both stores were probably guilty of keeping a pre-Amazon strategy for far too long,” said Zel Bianco, president and CEO of Interactive Edge. “Incorporating mobile shopping and encouraging an omnichannel experience could have gone a long way.”
Now landlords have been given a stark wake-up call. According to Cushman & Wakefield, asking rents in the Times Square sub-market fell 18 percent to $2,104 a square foot in the third quarter, compared with the previous year’s high of $2,500—the steepest drop in Manhattan
It’s not just Times Square that’s feeling the online pinch. Throughout the city, tasking rents have been tumbling like boulders in a earthquake—down 11.5 percent on Madison Avenue and 11 percent on Fifth Avenue according to brokers Cushman & Wakefield. For New York businesses to survive, they can’t simply rely on tourists, turning Manhattan into Vegas with down jackets. Office workers and residents can provide a captive audience.
“You have a booming residential market west of Eighth Avenue and millions of square feet in Times Square that wasn’t here 10, 9 years ago, but only a handful of retailers geared toward the local-residential and local-worker market,” said Tim Tompkins, president of the Times Square Alliance.
Maybe Times Square has to revert to a PG version of it’s former self—a place to go for good time.
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