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GOTHAM POWER CENTER

Big-box stores cluster in Manhattan’s Chelsea area

BY ED McKINLEY

A Wal-Mart Supercenter is all that is missing from New York City’s “Ladies’ Mile.” The district, which runs along Sixth Avenue between 18th and 23rd streets, has become crowded Manhattan Island’s answer to the suburban power center — 14 big-box retailers, including Burlington Coat Factory, The Home Depot and Staples, operate in close proximity here.

“It’s a hot neighborhood,” said Faith Hope Consolo, vice chairman of Garrick-Aug Worldwide, a New York City-based retail real estate brokerage. The area straddles the dynamic Flatiron District to the east and the desirable Chelsea community to the west.

During the past decade, category killers have opened stores along the street to benefit from one another’s ability to draw traffic. “There is a synergy created anytime you have a mass of retail in a pedestrian urban environment,” said Valerie Richardson, CLS, vice president of real estate at The Container Store, which launched its first Manhattan store on Ladies’ Mile in November 2003. The store, housed in the old B. Altman department store building at 625 Sixth Ave., extends from 18th Street to 19th Street.

Ladies’ Mile acquired its name sometime in the late 1800s, when department stores thrived there before merchants began moving their emporiums farther north. Hard times ruffled the district throughout much of the 20th century, with factories prevailing over fashion stores. In recent years developers converted upper floors into loft apartments and offices, and national retailers began renting space at street level and in the basements.

The six-block stretch began to morph into a power center in 1992, when Bed Bath & Beyond opened a 50,000-square-foot store at 620 Sixth Ave., at 19th Street. Stores began migrating to the neighborhood only after retailers had saturated markets throughout the United States. In their need to keep expanding, merchants have finally turned their attention to Manhattan despite the borough’s high rents, challenging logistics and scarcity of space, according to Merritt Sher, who founded San Francisco-based Terranomics Corp. in 1970. Sher is credited with inventing the power center by building 280 Metro Center, in Colma, Calif., in 1986.

While stores were moving into the area, the residential population was increasing, more companies were renting office space, and hotels were going up, says Consolo.

One of the latest additions to the mix is the 105,000-square-foot Home Depot store that opened at 40 W. 23rd St. in September just off Sixth Avenue in the old Sterns department store. Rents on the avenue today have soared to more than $100 per square foot, real estate brokers say.

Staples, which operates 22 stores in Manhattan, opened a 19,000-square-foot store at 699 Sixth Ave., at 23rd Street, in October 1993, before the area had gained the critical mass to operate like a power center. The store succeeded, though, and now it is able to “feed off” the traffic from the more recent retail development.

Customers come mainly from Manhattan, but also from the outer boroughs and the suburbs, as well as from among the ranks of tourists, to enjoy the convenience of single-trip shopping, according to real estate brokers, stock analysts and retailers. The neighborhood alone could not support the stores, these experts stress.

Legions of people walk the strip on their way to work, says Chris Michels, product manager for demographics at MapInfo Corp., a Troy, N.Y., research firm. Some 1,500 people were living within a few blocks of that stretch of the avenue by 2003, according to MapInfo research, but the so-called daytime population, swollen by the ranks of office workers, shoppers and tourists, climbed to to more than 29,000.

Volume of potential shoppers aside, the street provides some of the city’s rare opportunities to rent large spaces at ground level, says Michael J. Hofmann, senior managing director at Colliers ABR, a New York City-based real estate services firm. “That’s always been the problem for big boxes” in Manhattan, he said. “Where can they get the size and space they need and then logistically be able to accomplish it with getting the trucks in and out and being able to move the product internally in those buildings?”

Plus, but “there aren’t that many places in the city where you could have three-level spaces,” said Beth Greenwald, a broker at locally based Newmark New Spectrum. She notes, too, that retailers could find large spaces farther west in more sparsely developed parts of Manhattan, but those are relatively far from the public transportation that feeds potential shoppers into the Ladies’ Mile.

Finding sufficient space weighed heavily in The Home Depot’s decision to locate its first Manhattan store in the area, says Jose Lopez, the company’s New York metro region vice president. By coincidence, the 105,000 square feet the chain managed to put together on three levels behind two facades is roughly equal to the average size of its single-story suburban stores.

City store, town store
The merchandise mix in the Manhattan store differs significantly from the assortment in suburban Home Depots, Lopez says. Lumber and other building materials and the oversized containers of such products as cleaning supplies — the hallmarks of most Home Depot stores — aren’t on display in Manhattan. Customers can order these on an electronic kiosk for delivery from a consolidation center in Edison, N.J.

Instead, this Home Depot devotes space to fashion-forward offerings and innovative products, including a display of 40 area rugs — each of them unique, says Lopez. The store offers some 1,200 cabinet fixtures, triple the number in stock at the typical Home Depot and possibly more than in any other Manhattan store. Kitchen and bath vignettes are smaller than in suburban Home Depots because many Manhattan residents live in small apartments. Not only does the store offer a greater variety of flooring and lighting than its suburban counterparts, but it is more fashionable.

Virtually no changes were needed in the product lineup at Container Store, says Richardson, because the chain’s goods were already designed to organize customers’ belongings — a natural for space-challenged New Yorkers. The Manhattan store’s 25,000 square feet of selling space roughly corresponds with the 24,000-square-foot sales floor of the chain’s prototype. In New York, Container Store has selling space on the main floor with office and storage space in the basement.

The Filene’s Basement formula of offering name brands at low prices works well at the 30,000-square-foot, basement-level store the chain has operated since 1995 at 620 Sixth Ave., 19th Street, with T.J. Maxx and Bed Bath & Beyond right above, says spokeswoman Pat Boudrot. “New Yorkers love a bargain,” she says.

The Best Buy at 60 W. 23rd, one of the chain’s two Manhattan stores, measures about 60,000 square feet, significantly larger than the 45,000 square feet of the average suburban Best Buy, says Joseph Feldman, an analyst in the New York office of SG Cowen Securities Corp. About 20 percent of the space is at ground level and the rest below ground, he says. The merchandise mix doesn’t differ greatly from that of the suburban stores.

Staples makes do with a smaller assortment in its Manhattan stores, which can be as small as 8,000 square feet, says Mark Bacon, Staples’ senior vice president of stores for the East Coast. The city stores don’t have the furniture pad of desks, chairs and credenzas found in the suburbs, but here, too, New Yorkers can order this merchandise on electronic kiosks for next-day delivery.

Though retailers accustomed to wide-open spaces find it difficult to do business in Manhattan, they see huge potential for sales volume in the city. The Home Depot unit could achieve $150 million in annual sales, for example, between three and four times the volume of the chain’s typical store, says Feldman.

But much as the Sixth Avenue strip serves as a de facto power center, there are departures. There is no low-slung string of concrete boxes with an ocean of asphalt and towering freestanding signs here. Instead, national chains make their Manhattan homes in multilevel space inside massive, century-old structures. These venerable buildings present facades of stately stone or intricate cast-iron, and store names are displayed using understated lettering on canvas awnings.

As far as power center maven Sher is concerned, the aggregation of stores on Sixth doesn’t really constitute a power center, because no one developer shaped it.

Some might say the city’s dynamics gave rise to the area, creating a “big-box district” in the tradition of the garment district, the tombstone district, the flower district or the numerous other specialized districts that have grown up and — in some cases — faded away over the years.