NEW YORK — The battle for shoppers at the tip of Manhattan just turned in favor of Brookfield Place.
On Wednesday, Brookfield Property Partners L.P. and Hudson’s Bay Co. confirmed that Saks Fifth Avenue will open in Brookfield Place at 225 Liberty Street in spring 2016, and that a Saks Off 5th outlet will open at One Liberty Plaza, another Brookfield property, in fall 2017. HBC owns Saks, Lord &Taylor and Hudson’s Bay department stores as well as the Saks Off 5th outlet chain.
WWD broke the news that Saks was looking to open in Brookfield Place on April 24.
The confirmation Wednesday nonetheless fueled perceptions that the market for retail and luxury sales downtown is hardly tapped and will be growing, and that Brookfield has a leg up over its primary rival for upscale retail tenants, Westfield World Trade Center.
Westfield expects to start having retailers open for business next year but has yet to reveal any tenants.
The company’s leasing efforts are further challenged by the decision of Off 5th to open a 55,000-square-foot outlet right across the street, by Century 21, the powerful off-pricer flagship that does $175 million in annual sales. Century 21 occupies a corner of Cortlandt Street, which, along with Saks Off 5th, could discourage upscale, regular-priced retailers and brands from opening in Westfield World Trade. They generally don’t like to be situated in the vicinity of off-pricers.
“Brookfield got all the luxury, and Westfield gets stuck with Century 21 and Saks Off 5th right at their front door. The battle for luxury tenants is over,” said one retail chief executive officer.
“Luxury can’t go next to outlets,” said a real estate source. “There’s never been a precedent.”
Still, questions remain for Brookfield as well, even as its center is almost fully leased. “The question remains whether that part of the city will become an epicenter of tourists who love to shop luxury,” said another retail ceo.
Michael Gould, the former chairman and ceo of Bloomingdale’s, believes they will. “There is an enormous amount of business downtown. Upscale brands like Hermès are seeing that, and the ongoing development will continue to drive luxury business downtown. I think a small, 85,000-square-foot Saks for Saks sounds like an appropriate size.”
Westfield and Brookfield were competing for a lot of the same brands, one real estate source said. “Brookfield was the underdog. It didn’t have the same notoriety as the World Trade Center, which is a global name. But Brookfield has been the talk of the industry ever since the rumors began about Saks Fifth Avenue.”
Now, Brookfield Place has only two spaces left, said Ed Hogan, national director of retail leasing for Brookfield. “There’s a 5,000-square-foot space on West Street, a high visibility storefront, and a 1,000-square-foot space,” he said.
Asking rents at Brookfield Place have most recently ranged from $350 to $400-plus a square foot for larger specialty stores on the ground floor, while smaller stores on the second floor are being rented in the low $400 range.
Combined, Brookfield Place, which reconfigured its space formerly known as the World Financial Center, and Westfield World Trade Center will have about the same amount of retail space as the World Trade Center had before 9/11. Westfield will have 440,000 square feet of retail space; Brookfield Place has 300,000 square feet of retail and dining.
Brookfield, which also has an entrance at 250 Vesey Street, is opening in March with Hermès, Ferragamo, Michael Kors, Ermenegildo Zegna, Scoop and other high-end retailers. Le District, described as a French version of Eataly, will open soon, and the more casual City Eats has already opened.
Westfield’s centerpiece is the Oculus, a dramatic design by Santiago Calatrava. It rises 150 feet at the highest point of the ceiling and is formed by a series of riblike structures that cover part of the store facades, which some retail experts said seemed to obstruct branding. There are also several imposing two-story, street-level spaces for flagships, with up to 8,000 square feet of space each, that have unobstructed facades.
“[Westfield] had deals lined up with Giorgio Armani and Tom Ford and Prada” for the two-level flagships, said the real estate source. After the Saks Off 5th deal became known, “they supposedly walked away from those deals.” Other brands said to have been in discussions to occupy the street-level flagships included Louis Vuitton and Gucci.
H&M, Uniqlo and Forever 21 are also said to be in talks with Westfield for space originally intended for luxury brands, according to reports.
Westfield declined to comment on tenants. “The process of finalizing the retail mix at Westfield World Trade Center is well along, as the majority of the space is committed,” said a Westfield spokesman. “It includes the best global fashion and lifestyle brands, great technology offerings and a host of conveniences with a modern twist, from salons to juice bars, and a range of new concepts in culinary offerings, from on-the-go to upscale dining. It is a curated mix for the vast audience we will serve, ranging from the residents in the neighborhood, to hundreds of thousands of professionals, to international travelers. We look forward to previewing our retail roster in the coming weeks and months.”
Westfield’s asking rents, depending on location, can be as high as $450 a square foot, with added costs such as a percentage of sales, according to sources.
“We are having a complete retail revolution in Lower Manhattan,” said Jessica Lappin, president for the Alliance of Downtown New York. “We’re confident there is demand. There are 60,000-plus people who live here and 310,000 people who work here. We had 11.5 million tourists before Hurricane Sandy. Some of this is replacing lost retail, but we think the area was somewhat underserved. This is a whole new era. We didn’t have 60,000 people living downtown, we had 20,000. The growth in the tourism industry has fueled some of this. We have an estimated $5.2 billion in annual purchasing power in Lower Manhattan.”
Rents on key streets have also jumped significantly with asking rents on lower Broadway, where Urban Outfitters and Zara are opening, in the $500 a square foot range.
“Westfield has expressed in terms of their vision, more of a mix,” said Lappin. “For example, you can buy a luxury watch for you wife on your anniversary and go to a children’s store and buy back-to-school clothes.”
HBC is also leasing 400,000 square feet of office space, adjacent to the Saks Fifth Avenue store at Brookfield Place. HBC will create a central home office for all of its business units scattered around Manhattan, including the department store group, Saks, Saks Off 5th, digital operations and HBC shared services.
“It’s unbelievable what’s going on downtown, with the number of young vibrant people walking the streets, moving into new and existing housing, the volume of high-quality office tenants coming in like Condé Nast, a variety of banks, high-tech firms, all kinds of things,” said Richard Baker, the chairman and ceo of Hudson’s Bay Co. For the 2,000 office associates that will be moving downtown, “We think it’s a great environment. We also think this project will attract customers from Brooklyn. This will be the closest luxury shopping venue to Brooklyn. Brooklyn is a big part of this.”
Saks downtown will have 85,000 square feet over three levels. While that’s far smaller than the 650,000-square-foot Saks Fifth Avenue flagship, and somewhat smaller than the average Saks store, at 100,000 square feet, according to Baker, “We are going to have a strong, full-line store, with men’s and women’s and accessories — everything one would see expect to see at Saks. There will be a lot less apparel than Fifth Avenue; it will be a very compelling offering for the market the size of downtown.”
Baker denied that the move to open a Saks store downtown was driven by the decision to take office space downtown, stating that initially, he explored downtown for just a Saks store. “We went downtown to look because I was told by an associate that it was a compelling location for Saks.” Baker said he was “so impressed” that he thought the location would also make sense for bringing corporate offices to one site.
He also stressed that while the offices would be consolidated, the move won’t lead to job cuts. “This has nothing to do with exiting jobs and everything to do with creating an exciting, interesting, high-quality environment for our associates so we can attract and hire additional associates and maintain the team we presently have. We are growing by a net 200 new jobs a year. A strong percentage of that is for digital growth.”
“This move will base our New York City corporate associates in a state-of-the-art facility with exceptional amenities that will support our growth, and enable more integration and collaboration across our banners and functions. We are particularly excited about this location in Lower Manhattan and believe that this vibrant and flourishing area is quickly becoming one of New York City’s premier office locations,” commented Donald Watros, HBC’s president.
Three weeks ago, Neiman Marcus said it would open a store in Hudson Yards, which is under development on Manhattan’s West Side in Midtown. “We looked at Hudson Yards for Saks but didn’t think enough people lived in the vicinity to successfully support a Saks store,” Baker said. “Downtown also has lots of people presently working there. Hudson Yards has nothing. It will take 15 years,” for that West Side market to develop.
But Karen Katz, the president and ceo of the Neiman Marcus Group, recently told WWD, “Demographics show that the growth and population on the West Side and Southwest Side of the city is growing much faster than other parts of the city. Our expectation is that it becomes a tourist destination with a good mix of West Siders, people who also live downtown and international tourists.” NMG also operates Bergdorf Goodman, but Katz said she believes the company is underserving New York City.
The significance of Off 5th locating downtown was not overlooked. “It will become the flagship for our growing outlet business, exemplifying our strategy to expand our off-price concept into urban markets,” Baker said.