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THE BIG PLUM

Retailers and builders scramble for a spot in Manhattan

By Curt Hazlett

When it comes to retail real estate, Manhattan is a land of intrigue and energy. Rumors abound about deals and developments in the New York City borough: Which developer will finally land Nordstrom? What will become of the underachieving South Street Seaport? Change is a constant. Neighborhoods that have not seen a retail project in decades suddenly find themselves with shiny new big-box stores. And, as always, politics plays a big hand — ask anyone who has observed the wrangling over plans for a new rail station at the old Farley Post Office (at Eighth Avenue between 31st and 32nd streets, across from Penn Station and Madison Square Garden), a centerpiece of efforts to remake the city’s West Side.

Of course, there is also the big question of what kind of retail will wind up at a resurrected World Trade Center site when stores open there in 2010, but that is a lifetime away in New York real estate. In the meantime, there are plenty of projects and retail development trends worth noting as Manhattan continues to reinvent itself. Here are just a few.

Harlem’s big-box boom
Harlem sits at the northern tip of Manhattan island, but this historic black neighborhood has generally not shared in the borough’s prosperity. It suffered through decades of economic decay before things began looking up in the 1990s. Now there are signs of rebirth everywhere.

Business is booming along 125th Street, Harlem’s main thoroughfare. Its grand old brownstones are being renovated as fast as they come on the market, and new construction, both residential and retail, continues throughout the area.

The latest and biggest retail project, announced in September, is East River Plaza, a long-awaited development on six acres south of 119th Street, near the FDR Drive. Blumenfeld Development Corp., of Syosset, N.Y., has been working to develop the former wire-factory site for 12 years and has teamed up with Forest City Ratner Cos. on the $215 million project. East River Plaza is scheduled for completion in 2008 and will contain a 136,000-square-foot Target and a Home Depot as anchors. “Harlem has been an incredibly underserved market, which all the developers have come to realize,” said David Blumenfeld, vice president of Blumenfeld Development. “It’s an incredibly populated market, and you can see the revitalization happening.”

East River Plaza was the only retail project in Harlem when Blumenfeld Development started putting the deal together in 1994. Now there are many. Among the most recent: Blumenfeld’s Gotham Plaza shopping center and Forest City Ratner’s Harlem Center, a 12-story retail and office development. Both opened in 2002, and Blumenfeld says both are reporting strong results.

Harlem proves that the big-box format has a home in the big city, but it is doubtful that many of them will spring up in other corners of the borough. “Manhattan is a difficult place for them,” Blumenfeld said. “It’s a hard place to get that much footage and accommodate the product turnover.” He notes that Costco had been eyeing an anchor position at East River Plaza but then dropped out. “The biggest issue for Costco, I think, was whether they could move the product in and out as fast as people would buy it,” he said.

A sea change at the Seaport
For almost as long as it has been in business, the South Street Seaport has been remaking itself. Opened by The Rouse Co. in 1983 on an East River pier a few blocks south of the Brooklyn Bridge, the Seaport struggled over the years to find tenants that would make it popular not just with tourists but with New Yorkers, observers say.

It looks as if the next reinvention is about to begin, this time under the guidance of General Growth Properties, which bought Rouse in 2004 for $7.2 billion.

General Growth’s chief executive, John L. Bucksbaum, SCSM, is not talking about what changes his company will make at the 300,000-square-foot mall, which some local real estate observers believe will be razed and rebuilt. “There’s nothing I can tell you, since it is still in the predevelopment stages,” Bucksbaum said. But he did say that redeveloping the property “is of the highest priority. Transforming it from what it currently is into what it will be is going to be a very large project.”

Retail experts like Jeffrey D. Roseman, executive vice president of Newmark Knight Frank Retail, look forward to a change. “It’s going to be a tremendous boon for downtown,” Roseman said. “The South Street Seaport was such a magnificent plan, but the reality is that it just missed. As a New Yorker, it was never on my list of places to go. The mix was kind of like a mall in Cincinnati. Most of those retailers were somewhere else in the city.”

Though General Growth’s plans for the Seaport remain a secret, company officials have told local publications that hotel, dining, cultural and residential components are likely to be added to the retail. Aiding the transformation is the availability of adjacent buildings that had housed the Fulton Fish Market until late last year, when the market moved uptown to the Bronx. General Growth holds lease options on two of the former market buildings, and a lease on the third is being negotiated by The Drawing Center, a nonprofit that exhibits drawings. The city is hoping the 95-acre Fulton Street corridor will be reinvented as a cultural and street-retail center.

One sign of Lower Manhattan’s potential for retail came in January, when Women’s Wear Daily reported that Nordstrom and The Related Cos. were considering a Battery Park City location for the retailer’s first Manhattan store. (Nordstrom denied the report, and Related isn’t talking.)

What would finally turn the Seaport into the draw that Rouse had hoped it would be? “If you’re going to look to fill it with the same everyday retailers as everywhere else, I don’t think that’s the way to go,” said Roseman. “But figuring out a vibrant mix of retail and restaurant and entertainment isn’t that difficult, and General Growth is pretty good at what they do.”

Tribeca goes for big retail
Tribeca has been trendy for many years now, but big retail has been slow to catch up with its burgeoning residential market. That is changing.

Construction is under way on a 1 million-square-foot mixed-use project at 270 Greenwich St. that will contain 170,000 square feet of retail, 228 condos and 162 rental units. According to developer Edward J. Minskoff, this is the largest retail and residential development in the Lower Manhattan area south of Canal Street in decades. (The name Tribeca derives from “triangle below Canal.”)

The retail component includes some heavy hitters. Whole Foods chose the neighborhood as the setting for its fourth Manhattan store, with Barnes & Noble and Bed Bath & Beyond rounding out most of the remaining space.

Retail’s attraction to Tribeca can be explained by a shift in demographics. Lower Manhattan is the fastest-growing residential neighborhood in New York City, having seen a 44 percent increase in population since 2000. Nearly 6,000 housing units have been built since then, and an additional 7,400 are expected to go up by 2008.

The Greenwich Street project — also known as 101 Chambers St. — represents Minskoff’s vision “to bring large-space retail down into a neighborhood that is relatively underserved in terms of retail,” said Robert K. Futterman, chairman and CEO of the Robert K. Futterman & Associates brokerage, which is involved in the leasing.

“There has never been a lot of big space in Tribeca, and there has not been a critical mass of retail,” Futterman said. “This is really the first big development there.”

Building into the future
Perhaps the greatest potential for retail development lies far down the road — and in two widely different parts of Manhattan: the World Trade Center site and the West Side.

After years of sometimes bitter tussling over plans to rebuild on the site of the Sept. 11 terrorist attacks, construction has finally begun on the Freedom Tower, centerpiece of the project. In October the Port Authority of New York and New Jersey approved almost $2 million for planning on the 200,000 square feet of retail that will be built in the site’s transportation hub. The first retail space is expected to open in 2010.

“With all that’s gone on the last several years, it’s nice to see that it is under construction, and I think there will be a retail plan in place pretty soon — I’m hoping within the next few months,” said Futterman. “It’s early in the game, and the Port Authority hasn’t talked to any tenants. But come this spring I think it will start to take shape and have some direction.”

The emerging of the area as a residential center is encouraging other retail growth as well. Brookfield Properties, owner of the World Financial Center, which consists of four office buildings and the glassed-in Winter Garden adjacent to the WTC site, says it is considering a doubling of its retail component from the current 175,000 square feet.

Brookfield “sees an opportunity now with the reinforcement of residential growth downtown to have more seven-day-a-week shopping,” said Faith Hope Consolo, chairman of retail leasing and sales at Prudential Douglas Elliman. “They need a big specialty store, which would work there very well. They are trying to capture the moment before the World Trade Center gets rebuilt and fill the need there.”

The outcome for the West Side is less clear. At the center of the city’s revitalization plan is conversion of the massive Farley postal office building into a new rail hub that would replace the crowded Penn Station. The plan would create 850,000 square feet of retail in the station and additional retail to the west of the old railroad station.

Gov. George Pataki, the New York state Senate, New York City Mayor Michael Bloomberg and the city’s congressional delegation have all backed Moynihan Station, as the project would be called. But in October state Assembly Speaker Sheldon Silver derailed the project for at least a year by refusing to support it. He pushed instead for a more expensive plan that would move Madison Square Garden into part of the post office building and free up the current Garden site for redevelopment. That plan was proposed by a partnership of Related Cos. and Vornado Realty Trust.

The real estate industry is watching the political fight closely. “It’s got potential for some tremendous retail opportunity,” said Futterman. “If the Garden moves to Ninth Avenue, you’ll open up a lot of space.”

Said Consolo: “It would help revitalize a very gritty area. It’s a neighborhood that’s been through so many transformations, and it really needs to be changed.” Developers would have no problem filling retail space in the area, she says.

Futterman agrees. Moynihan Station would be a tremendous boost for the West Side, he says, one that could result in a variety of new retail in the neighborhood, possibly including big boxes.

But will it happen? “I don’t think it’s dead,” he said. “It sounds very political. If the new governor comes in and wants to do it or the current governor wants to make it his legacy, it might get resolved.”

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