By  on April 16, 2007

NEW YORK — Retail development is heating up around Bloomingdale's Manhattan flagship.

Spurred by the opening in 2005 of the 54-story Bloomberg Tower, which houses the headquarters of Bloomberg L.P., the media and financial services company, multimillion-dollar condos, restaurants and retail space, the 59th Street neighborhood has lured fashion, footwear and furniture chains. And more retailers are on the way, pushing out smaller, independent merchants.

The streets just north and south of East 59th Street, along Lexington and Third Avenues, are capturing the mass character of 34th Street/Herald Square, but with some higher price points, too.

"It's a neighborhood emerging at all levels of fashion, from accessible to designer," said Matt Rubel, chairman and chief executive officer of Payless ShoeSource, which this summer is to open a 3,000-square-foot store at 716 Lexington Avenue, between 57th and 58th Streets. "It's attracting the New York consumer as well as tourists."

Rubel described the new Payless unit as a flagship for Manhattan's Upper East Side and one of the chain's new "fashion lab" formats. It will feature clearly defined sections for women's, men's, children's and athletic footwear, as well as self-select environments spotlighting seasonal trends and product themes with easy-to-reach shoe boxes below.

A Steve Madden store is coming to the southwest corner of 58th Street and Lexington, next door to Payless, and a 30,000-square-foot furniture store — there is speculation it could be Ethan Allen — might be moving onto the northwest corner of 60th Street and Third Avenue.

"The neighborhood is definitely all coming together," said Joanne Podell, senior director of retail brokerage at Cushman & Wakefield, the real estate firm.

Mario Moretti Polegato, founder and ceo of Geox, the innovative Italian footwear and apparel retailer and wholesaler, said the company looked for space in the area for a long time until finding the right spot about a year ago — an 1,100-square-foot unit in Bloomberg Tower. There also is a 6,000-square-foot Geox at Madison Avenue and 57th Street, considered a flagship.

Polegato said there is enough customer traffic for the two units to coexist. "The Lexington store has no less of an impact," he said. "It features very large windows overlooking the strong technological design of the shop. The store has a very minimalist design in line with the Geox Shop concept.''With the wide mix of shoppers in the area, "we set an average price on our products of a mid to high range so it can help generate intense store traffic and allow for a high volume of sales," Polegato said.

"On Madison, you have more luxury customers," said Laura Pomerantz, principal of PBS Realty Advisors. "On Lexington, there's a younger, more middle-ground aspirational luxury customer."

Real estate executives often compare the 59th Street vicinity with 34th Street, noting that each has concentrations of moderate- to better-price retailers, heavy pedestrian traffic and subway hubs. Both areas draw plenty of tourists, though more visit 34th Street, site of the Empire State Building and Macy's Herald Square and nearby Madison Square Garden. Thirty-fourth Street generally lures a younger, less affluent crowd, and more commuters because of its proximity to Penn Station, the executives said.

"It's funny that when landlords talk about the two markets, they always quote similar volumes," said Karen Pellantoni, senior vice president, Robert K. Futterman & Associates, a real estate firm. "I am very bullish on the 59th Street area. I wish there was more space."

Michael Gould, chairman and ceo of Bloomingdale's, has had a front-row seat from which to observe the neighborhood's evolution.

"Luxury apartment houses are going up, lots of town houses in the Sixties are being refurbished and what we've done inside our store has been really exciting," he said.

Gould said Bloomingdale's renovations to re-create bridge, contemporary, shoe and lingerie floors, among others, had attracted more shoppers to the flagship and had helped elevate the shopping appeal in the neighborhood. "Our business over the last five years has been terrific," Gould said. "We've been getting substantially more traffic."

About 70 percent of the visitors to Bloomingdale's are from New York City and 30 percent are tourists, he said.

The Bloomberg Tower sits on the former Alexander's department store site, between 58th and 59th Streets, from Lexington to Third Avenues. After Alexander's abandoned retailing in 1992, the building was dormant for years until it was razed, leaving a giant crater that diminished the neighborhood's pulling power.In 2001, Vornado Realty Trust, which bought Alexander's, began construction, generating interest in the area among retailers, with several signing deals. The Bloomberg Tower includes Le Cirque restaurant, the One Beacon Court luxury condominiums, Home Depot and Bank of America on the Third Avenue side, and Hennes & Mauritz, Geox, Swarovski and The Container Store on the Lexington Avenue side.

On the blocks immediately south of the tower along Lexington Avenue, New York & Company Inc., Sephora, Boyds, Aerosoles and Zale have opened stores in the last couple of years. And on Third Avenue, Urban Outfitters and the Door Store moved in, strengthening that stretch as a home furnishings enclave, anchored by the D&D home design building and Maurice Villency.

A David Burke restaurant opened last year on 59th Street in Bloomingdale's, adding verve to a stretch that was never shopper-friendly, partly because of the heavy car, truck and bus traffic from the nearby Queensboro Bridge.

Earlier leases solidified the block between 59th and 60th Streets on Lexington, where there are stores for Levi Strauss, Nine West and Zara.

With the rise in retailing, Pellantoni of Robert K. Futterman said rents have escalated to more than $500 a square foot along Lexington Avenue near Bloomingdale's, from $300 two years ago. Farther east, on Third Avenue, rents have increased about $100 a square foot, to the mid-$300 range, she added.

"It's become a very strong corridor," Pellantoni said. "I would like to think it will push up to Equinox," the health club at Lexington and 63rd Street. "The cutoff has always been by Diesel," which is at 60th Street and Lexington. Going south, the border seems to be 57th Street, where there is a Kenneth Cole store on Lexington Avenue, and then a choppy melange of food establishments and independent, local merchants, she observed.

"Within that small corridor along Lexington from 57th to 60th Streets, any [available] space is going to get more and more expensive, and that has a lot to do with Bloomingdale's," Cushman & Wakefield's Podell said. "It's going to move further north'' to the former Barbizon Hotel, at Lexington and 63rd Street, which is being redeveloped with condos. That means more shoppers to the area.

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