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WALL ST. MOVES UPTOWN

LUXURY CHAINS ARE TARGETING THE WELL-HEELED IN NEW YORK CITY’S FINANCIAL DISTRICT

By Jesse Serwer

Despite the many high-net-worth individuals who do business on Wall Street daily, retail along that iconic New York City thoroughfare has never been especially upscale. Quick-serve restaurants and shoe repair shops have been more typical than name-brand jewelers or fine clothiers, so stock traders have generally had to hop the subway to make the sort of big-ticket, impulse purchases that often go with getting that big year-end bonus.

This year, however, a small wave of luxury retailers, including Hermès, Hickey Freeman, Thomas Pink and Tiffany & Co., opened stores either on Wall Street or elsewhere in the vicinity of the New York Stock Exchange. These follow the arrival of BMW of Manhattan, which opened a Wall Street showroom in 2005. Meanwhile, Italian menswear designer Canali is set to open a 2,500-square-foot boutique on Broad Street sometime early in 2008, and Brioni, another upscale clothier from Italy, is reportedly close to leasing a space, according to published reports.

“Luxury tends to follow luxury,” said David Tricarico, associate director of retail services at Cushman & Wakefield, which opened an office in the financial district in August to tap into the growing retail market in Lower Manhattan. “Now that Hermès and Tiffany are open, you’re seeing a lot of people, particularly high-end jewelry and watch retailers and also some automotive brands, that are even higher-end then BMW sniffing around down here.”

The area west of the financial district will soon see an infusion of retail space at the World Trade Center site and the new Fulton Street Transit Center. But for now the district’s historic art-deco office buildings, such as 15 Broad St., former headquarters of JPMorgan, where Hermès took up residence in June, offer the best opportunities for Paris-based Hermès, London-based Thomas Pink and similar old-world retailers to express their identity. “The potential was always here, but no one exploited it,” Tricarico said.

But some express concern that Wall Street-related layoffs and lower bonuses resulting from the volatility of the stock market this year could lead to holiday distress for retailers all over the city. The credit crisis that began this summer is likely to generate more job cuts on Wall Street, headhunters say. In August Bear Stearns laid off 240 employees after two of its hedge funds imploded, for example.

At the ICSC Research Conference, held in Toronto in September, Deborah Weinswig, a managing director of retail research at Citigroup, said she was worried about the fate of Saks Fifth Avenue this holiday season, because about 20 percent of the company’s sales come from its Fifth Avenue store. Weinswig expressed her concerns to Saks executives, she said, but they assured her that the bulk of that store’s sales come from tourists, not from Wall Street executives.

Thomas Pink is keeping a defiantly upbeat outlook regarding its first holiday season in the shadow of the NYSE, as are the other new Wall Street retailers, proximity to the eye of the storm notwithstanding.

“I wouldn’t draw a straight line saying that just because the stock market has been down therefore retail [in Lower Manhattan] will be down,” said Robert Dundon, president of Thomas Pink. The new store, the company’s fourth in New York City, opened in June inside the former Brown Brothers Harriman building, now a residential property called the Crest. “It’s still very early for us, but I wouldn’t say the performance of the stock market has had a tremendous impact on our business or our traffic,” said Dundon. “Once bonuses start coming back, you might see an effect on higher-ticketed items, but I don’t think that will be relegated to Wall Street. That would impact our other New York stores and our business at large.”

Tricarico concurs. “If the market continues to take a dive, you’ll have a bigger problem in midtown,” Tricarico said. “There’s actually more financial services people working there than in Lower Manhattan now. Lehman Brothers’ headquarters are not even downtown. That’s where the layoffs are going to be.”

Alan Johnson, managing director of Johnson Associates, a New York City-based compensation consulting firm, says that notwithstanding the layoffs in the mortgage and structured products divisions of the big banks, bonuses this year will still top the record $23.9 billion Wall Street firms paid out last year. In 2008, though, bonuses will start falling by as much as 10 to 15 percent, Johnson told CNNMoney.com.

Meanwhile, Lower Manhattan’s growing residential community has drawn the ultra-luxe retailers. “You have a whole residential population that you didn’t have five years ago,” said Joel Isaacs, president of Isaacs and Co., the retail brokerage that negotiated the Hermès deal at Broad Street.

Lower Manhattan is notable for being the only sizable area in Manhattan without any rent-controlled apartments, Tricarico says, and most residential units are condominiums. “People that live down here make a lot of money,” he said. In fact, the median yearly household income for residents below Chambers Street, the northern border of Lower Manhattan, is $165,000, more than three times the city average, according to the Alliance for Downtown New York, which represents Lower Manhattan’s business interests.

Meanwhile, there are nearly twice as many residents (about 40,700 currently) as there were in 2000. That will only continue to grow as 99 Church St., World Trade Center developer Larry Silverstein’s newly announced residential and hotel tower, and similar projects, go up. “You’re also drawing a lot of tourists down to the financial district now,” Dundon said. “It used to be that after 7 it was absolutely dead. You wouldn’t find anybody walking around downtown because all the workers ran back to the Upper East Side or Westchester. Now you’re seeing people getting the idea to linger a little bit. We’re really at the beginning of it. But you’ve got [upscale catering hall] Cipriani and some new restaurants, supermarkets like Whole Foods and new hotels that are going to keep business travelers in the area. I think when you put all that together, the financial district now becomes a [daytime] and nighttime community.”

This increased liveliness aside, the new Wall Streeters are staying cautious about operating hours. “We’re open from 8:30 to 6:30 p.m. and then a short Saturday from 11 to 4,” Dundon said. The Thomas Pink store will be open on Sundays during the holiday season, after which management will re-evaluate the feasibility of additional weekend hours throughout the year.

“We would like to see the tenants stay open a little bit later and open more on the weekends,” Tricarico said. Tiffany plans to keep a five-day week, he says, though it will be open on the weekends during the holidays this year.

“Despite any layoffs or, contrarily, additions of more people to the area, these luxury retailers on Wall and Broad are the ones everyone is watching,” Tricarico said. “The Ann Taylor Lofts of the world will do fine down there, the Borders down there is doing fine. If the pro formas come back as planned or even close to planned, retailers that were peeking around for the last 12 to 24 months will now make the commitment. The challenge is, this is an old, finite area, and there’s not a lot of space remaining.”

It is too soon to analyze the performance of Hermès, of course, or of Tiffany, which in October celebrated its return to Lower Manhattan, where it opened its first store in 1837. But BMW’s showroom has already proved to be a jewel within its crown, Tricarico says. “It’s their highest-grossing store without any test drives,” Tricarico said. “Two-thirds of the cars sold there are not even test-driven. People are saying, ‘Hey I want a 740, give it to me.’ That’s remarkable.”

If Hermès, Tiffany and their expected hordes of followers experience similar success, Wall Street could soon become as well known a location for unloading wealth as for obtaining it.