On the surface, the last thing over-stored New York City needs is another 750,000 square feet of retail space. Then again, it could work at Hudson Yards.
With the March 15 opening of The Shops & Restaurants at Hudson Yards, WWD contacted industry experts to weigh in on whether they think New Yorkers and tourists will frequent the center’s mix of stores anchored by the city’s first Neiman Marcus and lineup of restaurants by star chefs.
The consensus: give it time. Retailing at Hudson Yards won’t be an overnight smash. More like a slow cook.
“These things never come without risk, but when you take the project as a whole into consideration, there are so many things going for it that are unique,” said Jim Gold, the outgoing president and chief merchandising officer of the Neiman Marcus Group. “There’s real substance at Hudson Yards and if you want to go shopping for the day and not be exposed to the elements, it’s a great alternative with a full department store and a phenomenal lineup of stores, from utilitarian through luxury.”
He’s referring to the sheer scope and multiplex character of the 28-acre, mixed-use Hudson Yards project. When complete, it will encompass:
• More than 18 million square feet of mixed-use, residential and commercial development with five office towers including the 1,100-foot tall 30 Hudson Yards with the city’s highest outdoor observation deck.
• Approximately 4,000 residences, including luxury condos and affordable rentals.
• 14 acres of public open space.
• The Shed for artistic performances, events and possibly New York Fashion Week.
Then there’s the linkup to the bustling High Line elevated park, the proximity to the Jacob K. Javits Convention Center, and that soaring Thomas Heatherwick outdoor sculpture called the Vessel, beckoning people to hike up and down its 2,500 steps, 80 landings and 154 interconnected flights of stairs. While tenants have started moving into 15 Hudson Yards, as have commercial tenants at 55 Hudson Yards, move-ins at 30 Hudson Yards begin in March. 10 Hudson Yards is already fully occupied by several major corporations including Tapestry and its Coach, Kate Spade and Stuart Weitzman divisions; L’Oréal USA, Boston Consulting Group, VaynerMedia and SAP.
Hudson Yards, being developed by Related Companies and Oxford Properties Group between 30th and 34th streets and 10th and 12th avenues, sits atop giant steel and concrete platforms covering the train yards. It’s a new neighborhood, transforming what was for decades a wasteland of abandoned warehouses and businesses. Like any neighborhood, it didn’t all come together overnight. As construction continues, different elements open at different times.
“It’s quite a critical mass but it will take time to be built out. Eventually, it will be fine,” observed Mark Cohen, director of retail studies and adjunct professor at Columbia Business School. “Unlike the Oculus which was dead on arrival and Brookfield Place (both in lower Manhattan) this is going to be fine. It is off the beaten track but it will be a real attractive draw to tourists and it will be a draw for New York residents, but there’s a lot of housing yet to build in and around Hudson Yards.”
“Time will tell,” said Michael Gould, the former chairman and ceo of Bloomingdale’s, when asked if he thought retailing in Hudson’s Yards will catch on. “It’s not about the first three months or six months after the opening. It will take a number of years before we really see the potential. The two easiest things in retail are opening a store and closing a store. Everything in between is the tough part.
“But I think that area of New York has enormous potential, if office towers and residences continue to be built. More importantly, if it becomes a living community,” Gould added. “Off the bat, the food and beverage I think has enormous potential. The High Line and the Vessel are tremendous attractions, particularly for tourists. The apparel and accessory shops will take awhile to show what they really can do.”
The seven-level Shops & Restaurants at Hudson Yards will house luxury and premium brands and a “floor of discovery” for new concepts like the Snark Park exhibition space for immersive exhibits, and The Conservatory, a 6,900-square-foot multibrand concept by Brian Bolke, cofounder of Forty Five Ten in Dallas, for a wide spectrum of categories, sizes and ages with fashion, florals , tabletop, art, gifts and a tea room, all based on the notion of “considered luxury.” There is also a run of digitally native brands creating their first stores like Mack Weldon men’s underwear and Rhone men’s activewear, and Heidi Klein swimwear from the U.K. makes its U.S. debut.
On the luxury side, there’s the 190,000-square-foot, Neiman Marcus on the top three floors of the mall. It will have windows along Tenth Avenue and express elevators for shoppers. The mall will also have Cartier and Van Cleef & Arpels.
On the moderate side, there’s H&M, Madewell and Zara. L’Oréal-owned Atelier Cologne and Kiehl’s will have shops. Muji USA will get experiential with an embroidery station to personalize products and Uniqlo will test a small format.
“As New Yorkers, we deserve something that is fresh and new,” said Paco Underhill, the retail anthropologist and founder of Envirosell. “The question isn’t how well Hudson Yards does when it opens. It’s how well it does three years from now. There are 26 major shopping malls in the New York metro area, so a new shopping mall has to have something that gives you a reason to drive past the other places and make the commitment in time.”
It’s got to have the kind of services and amenities out-of-town visitors and tourists want, Underhill stressed. “How do you leverage that? Will there be personal shopping in multiple languages? How will they use the High Line as one of the gateways into the center, given many people will be interested in walking through the center but won’t want to carry their bags out because they haven’t finished their day yet. And will the menus in the restaurants be in multiple languages? At Galeries Lafayette (in Paris), the menus are in English, Chinese, Arabic and Farsi…You also have to consider the degree to which that complex embraces public transportation.”
“I’ve been around the world and have seen some of the best large-scale projects, whether it’s Tokyo Midtown, or Westfield London,” said Gene Spiegelman, vice chairman and principal of Ripko Real Estate. “You can’t underestimate Related’s project here. It’s a world-class destination that will attract people from far and wide, outside of those who live and work there. It will be successful. Over time, it’s a winner.”
Spiegelman is betting on Hudson Yards to succeed partly because of the success of Related’s Time Warner Center, which opened in phases beginning in 2003 and houses The Shops at Columbus Circle with Amazon Books, Whole Foods, Bose, J. Crew, Hugo Boss and H&M (among other shops) and restaurants including Per Se, Momofuku Noodle Bar and Bouchon Bakery. There’s also Jazz at Lincoln Center, the Mandarin Oriental hotel, luxury condos and offices.
“You know how many people were throwing stones at the Time Warner Center at the beginning when it first opened?” asked Spiegelman. “Everyone thought of vertical retail in New York City as a flop up until that point. No one ever did vertical retail right.”
“Manhattan’s interest in vertical shopping, although ambitious, has so far been a bit of a disappointment. Locals and tourists alike have proven that New York is most successful at street-level shopping experiences,” observed Norman Roberts, vice president and creative managing director of FRCH Nelson. “With the Shops at Columbus Circle, where Whole Foods on the lower level drives the business, and the Oculus, where we’ve seen high foot traffic on the first and second floors, for retailers on the upper floors like Eataly, it is a much more challenging scenario.
“The reality is retail, regardless of location, is vertically challenged,” Roberts added. “Department stores since their inception experience dramatic drop-offs in sales per square foot as you move up the building. It’s built into the department store’s business model. I’d argue the interest in “vertical retail” is more of a developer fixation, to build excitement and broaden interest in a project. Outside of dense urban centers in Asia, where even there the bulk of the retail business happens on the lower floors, retail is robust on the first three floors with services and F&B on the upper floors. It’s no accident that Santa has lived way up on the eighth floor at Macy’s for decades.”
As far as attracting retailers to Hudson Yards, “They clearly had to incentivize tenants to come into the project,” said Spiegelman.
Some sources said Neiman’s got free rent for a few years and some luxury brands were guaranteed “four-wall profits.”
“We gave nobody free rent,” stated Kenneth A. Himmel, president and chief executive officer of Related Urban, though he added, “We did deals where we invested in the store and got a higher percentage of sales as rent. We helped them build and we made sure we got them their best possible store with the best finishes and with the best architects on the job. With any developer anywhere today, everybody is doing the same thing.”
Before Neiman’s committed, Related reached out to Bloomingdale’s, Saks Fifth Avenue, and Nordstrom, which came close to signing for Hudson Yards but instead opted to open on West 57th Street and Broadway. Nordstrom’s men’s store on 57th Street opened last April, and Nordstrom’s larger women’s flagship opens in late October.
“Hudson Yards retailing could struggle for years, but eventually it could find its place when the market fills in on the west side,” said one senior level real estate executive who requested anonymity. “Hudson Yards will have to figure out over time who their customers really are. Right now, they’re guessing. Once it opens and operating, they’ll know where the customer is coming from and what their price point is. Will people come over from Midtown? It’s very tough to know. Every single brand there is available in multiple locations. But the way it all comes together at Hudson Yards creates a unique synergy, a unique destination. They did OK bringing in the office tenants, and clearly, there is a very distinct restaurant content” with about two dozen food options from star chefs like José Andrés, David Chang and Thomas Keller bringing fine dining as well as regional chains and independent eateries for more casual fare.
“The big money-maker for Hudson Yards is the residential,” said one former retail chairman. “Everything else is an amenity — the hotel, the retail, the sculpture — they’re amenities to the residential. They make the office buildings and residential more valuable, more appealing, and there’s a glow to it. You put terrific food and beverage in, terrific retail, a Fendi, a Dior, Neiman’s. It’s about giving it more panache. Look at what happened at Time Warner in Columbus Circle. How did they make those condos so spectacular and so desirable that people paid top dollar for them? You have Per se, Whole Foods. That to me enhanced the condos — the real money-makers.”
Himmel’s point of view is different. “We’ll be making money in office. We’ll make money in the residential. We will make money in retail. We are not in this business to lose money in any part of the program. Some projects have a longer term of return. We are not merchant builders. We don’t think about selling anything. We are holding this asset for a long, long time.”
Other projects in the area should spur activity at Hudson Yards, notably the $1.6 billion redevelopment of the James A. Farley Post Office across the street from Penn Station. A big part of the post office is being gutted to create new entrances, waiting areas and an open ambiance for Penn Station commuters. Related, along with some other developers, as well as the MTA and Amtrak are contributing to the project.
Also going up, Tishman Speyer’s 2.85 million-square-foot, 65-story office tower between 34th and 35th streets at the end of the High Line called The Spiral. It’s marked by a cascading series of landscaped terraces, hanging gardens, outdoor space and 27,000 square feet of retail space.
As Underhill sees it, “Hudson Yards is another testament to the shift in balance in Manhattan, from northeast to the southwest and that maybe the Hudson River is something we should embrace more than put our backs to it. The Upper East Side has lost gravity. While Central Park and Fifth Avenue still have their cachet, lots of new money is migrating south and west, and the Whitney shifted downtown.”
“You have 6 million people a year coming off the High Line into Hudson Yards,” Neiman’s Gold said. “And consider the amount of office space — 12 million square feet — plus there’s office space in adjacent areas. That entire part of the city is being transformed and with the quality of companies coming in — private equity firms, hedge funds, banks, top-flight law firms — and all the residential through Chelsea, and more residential buildings going up in Hudson Yards, it feels the center of gravity of New York is shifting to the West Side corridor. And it’s underserved with retailing.”
WHAT CONCERNS INDUSTRY OBSERVERS
• Whether The Shops & Restaurants at Hudson Yards draws people and business from different parts of the city, changing shopping habits.
• Many of the retailers within the Hudson Yards mix can be found in more than one location in Manhattan.
• Vertical retail in Manhattan has a bad track record. The sole exception: The Shops at Columbus Circle, another Related property, though its retail mix is far smaller than Hudson Yards.
• Aside from linking to the High Line, “Hudson Yards doesn’t communicate with the outside community. It feels walled off and doesn’t integrate physically with the outside community,” said a real estate source.
• Ubiquitous vacant storefronts and recent closings by Lord & Taylor and Ralph Lauren on Fifth Avenue and Saks Fifth Avenue in Brookfield Place suggest Manhattan retailing is oversaturated.
DEVELOPERS MAKE THE CASE FOR HUDSON YARDS
• Manhattan’s transforming West Side is well underserved with retail.
• With the rise of Hudson Yards and nearby office and residential projects, Manhattan’s center of gravity shifts from Midtown to the West Side.
• Hudson Yards creates a continuum from the West Village north to the Upper West Side, potentially drawing traffic from both sides.
• The whole is more than the sum of its parts. Office towers, The Shed, The Vessel, residences, the hotel and proximity to the High Line and the Javits Center create synergies fueling the retailing.