WeWork is formulating a grand scheme for the Lord & Taylor flagship that involves radical surgery and a new retail vision.
While plans have yet to be finalized, sources told WWD that WeWork is considering reinventing the main floor with shops, restaurants, cafés and possibly an expo area, among other features, and downsize Lord & Taylor’s retail operation to three levels.
Sources also said Lord & Taylor will attempt to squeeze all of the categories it currently sells in the 11-level, 650,000-square-foot flagship building into what will be L&T’s remaining three selling floors.
Lord & Taylor declined to comment. A call to WeWork went unanswered Tuesday.
With three levels, at about 50,000 square feet each, a revamped L&T would have a total of 150,000 square feet of selling space, which is not far off the typical size of the retailer’s suburban stores.
According to sources, WeWork is on a mission to transform the Lord & Taylor flagship into a hub or community for office workers, shoppers and tourists. One of the sources said it’s likely Lord & Taylor ends up with levels two, three and four.
“It’s a brilliant idea,” one vendor source said. “WeWork is going to change it all. They’re coming up with a master plan for the flagship and it will be filled with new applications and formats. There will be different customers there everyday. It will be a tremendous draw, and even great for Lord & Taylor. It’s becoming a very, very vibrant area. Bryant Park is on fire.”
As reported last October, WeWork bought the Lord & Taylor building, situated between 38th and 39th Streets on Fifth Avenue in Manhattan, for $850 million. It will be WeWork’s New York headquarters, as well as housing offices provided by WeWork for other firms and workers. It’s hoped that the workers on the site, including lots of Millennials, shop the WeWork retail platform and ascend through the revamped Lord & Taylor selling floors on their way up to their offices and do some shopping on their way home, too.
Rhone Capital and WeWork’s joint real estate investment vehicle also invested $500 million in Lord & Taylor’s owner, the Hudson Bay Co., representing a minority stake in HBC. And WeWork is expected to move into other HBC retail locations where unproductive selling space can be reformatted.
It’s been speculated for months that WeWork is developing a retail strategy, and the transformation of Lord & Taylor would be among the first and most ambitious developments in the program.
The Lord & Taylor flagship will continue in the entire building through the 2018 holiday season.
Aside from Lord & Taylor, the stretch between 34th and 42nd Streets along Fifth Avenue is characterized by run-of-the-mill retail establishments including souvenir shops, drug stores, banks, coffee shops and moderate price sandwich stops. But the area has changed with the residential towers, new restaurants and boutique hotels opening in the last several years.
Despite its formidable presence on Fifth Avenue and various physical upgrades over the years, the Lord & Taylor flagship for decades has felt stranded, being blocks away from the hubbub of Herald Square and too far south of 42nd Street to capture enough of the Midtown pedestrian traffic.
Business for several years has been tough at Lord & Taylor, with the flagship long experiencing noticeably weak traffic compared to nearby Macy’s and Saks Fifth Avenue 10 blocks north. Given Lord & Taylor’s recent track record, it could be challenging for WeWork to sign leases at the site.
About 10 years ago, the flagship was given landmark status by the Landmarks Preservation Commission, which will limit how much reconstruction work can be done on the site. The store has four entrances, two on Fifth Avenue and one each on 38th and 39th Streets.
Hudson’s Bay will have to pay rent to WeWork for the three levels of Lord & Taylor, but vacating the main floor would enable it to avoid what would be the most expensive rent tab. “There’s no way Richard is going to pay market rent at that location,” said one retail source, referring to Richard Baker, executive chairman and governor of the Hudson’s Bay Co.
“For years, Richard Baker has had no apprehensions about running Lord & Taylor without a flagship Fifth Avenue store,” one industry source said. “He’s a real estate guy.”
As far back as 2006, when HBC bought L&T, Baker spoke of downsizing the flagship. “We believe 650,000 square feet is too large” for the Fifth Avenue flagship, he said at the time.
When the deal with WeWork was unveiled last October, Baker said it “dramatically de-levers” HBC. He also said “the future of Lord & Taylor is very strong and very exciting.” He said he sees the business maintaining its relatively small brick-and-mortar footprint and has “huge opportunities online” selling nationwide. A plan to sell Lord & Taylor merchandise on walmart.com is in the works.
At one time, Baker considered building a tower atop the L&T flagship, but the plan was scrapped. HBC in the past has done some renovation work on the flagship, refreshing the main floor, doubling the size of men’s wear to two floors, redesigning the fifth floor with 30,000 square feet devoted entirely to dresses and building a large shoe floor, among other changes.
WeWork is an eight-year-old, New York-based company with locations around the world that provide shared work space, with lounges and services for entrepreneurs, freelancers, start-ups and small businesses. Some locations even have fitness facilities. WeWork manages 10 million square feet of office space. WeWork members have included start-ups such as Consumr, HackHands, Whole Whale, Coupon Follow, Turf, Fitocracy, Reddit and New York Tech Meetup. It’s had plenty of investors including J.P. Morgan Chase & Co., T. Rowe Price Associates, Wellington Management and Goldman Sachs.
Lord & Taylor, considered the oldest U.S. department store, was founded on Catherine Street in the Chinatown section of Manhattan in 1826. It moved uptown to its present location in 1914 and is housed in a Starrett & Van Vleck Italian Renaissance Revival building.