Grand Central Station on track to become a retail destination

DSN Retailing Today, July 5, 2004 by Mike Duff

NEW YORK -- Just when you thought it was safe to declare the power center king of the retail world, malls are trying to make a comeback. The oft-repeated observation that no one is building major new malls has become accepted as a definitive pronouncement on the fate of a major retail sector, but clever operators are taking new approaches to the famously fickle consumers.

Even saying that there are no new malls isn't entirely correct. Maybe sprawling structures no longer arise at the edge of swelling suburbs, but many malls have sought to recreate themselves based on certain advantages.

First, malls and mall retailers are becoming more creative in presenting themselves to potential customers. Second, successful mall operators are expanding many successful established sites and incorporating new ideas as they grow. Third, in an era when new suburbs are not easily planted, malls, power centers and strip centers are becoming mutually supporting and sustaining retail entities.

While the second and third points will be explored in more detail in future stories, an element of the first, the development of creative new expressions of mall-style retailing, is worth discussing at the outset. But it must be recognized that many observers are skeptical about just how much growth potential malls have. "I don't see a rebound," said Philip Zahn, a Fitch Ratings analyst. "It's somewhat steady with the better malls doing okay." Some major department store chains are rebounding and the luxury market seems to be coming back, but the rebound comes after consolidation, and many of the strongest department stores are premier mall anchors. Secondary and tertiary malls have lagged particularly, with a few turning to discounters as anchors, but Zahn noted that those aren't the type of retailers that can be relied on to drive the crucial fashion apparel business.

That being said, however, creative thinking is boosting malls and mall-style retailers where natural advantages exist. Such is the case in New York's Grand Central Station.

Mall retailers have been turning transportation hubs into showcases for almost 20 years now as they have sought ways to penetrate urban cores. At first, many were tourist destinations, but retailers discovered that they could reach commuters and even retail-starved communities through transportation hubs.

Grand Central Station has become among the grandest.

Paul Kastner, vp and director of marketing for Jones Lang LaSalle, which helps operate the mall along with the New York Metropolitan Transportation Authority and Robert K. Futterman & Associates, said retail has been part of the amenities at Grand Central since the third iteration of the rail hub opened in 1913. In subsequent years, as rail was eclipsed as the main mode of intercity transportation by planes and automobiles, the building and its amenities declined in quality, said Nancy Jacobson Marshall, director of MTA's Grand Central Terminal Development, which runs Gotham's subway and commuter railroad lines and operates the hub facility.

All that changed as The Big Apple rebounded beginning in the 1980s and as a major restoration of the terminal was launched in the mid 1990s.

As the once famous Zodiac Ceiling was cleaned, marble was scrubbed and a second grand stairway was constructed, retail was both rethought and expanded. Over the past several years, a particularly New York retail infrastructure has emerged. Unlike the case of Times Square, the Grand Central Station redevelopment hasn't emphasized major chain retailers. Chains including Rite Aid, Banana Republic, Starbuck's and O'Henry's Film Works, are present, but many small local operators make Grand Central their homes, including Joon Stationery.

Papyrus, another stationery store, is about to become a chain within Grand Central. With leisure visitors, including several major weekly tour groups of as many as 150 people swinging through the building, many people who explore Grand Central shop around. Still, for many commuters, the experience of the terminal is an entrance, a passage and a train. Papyrus operates one of its most successful stores in the southeast portion of the building and is opening a second shop on the opposite side to attract commuters who never venture beyond their side of the building.

In all, 98 retailers occupy Grand Central. Total retail square footage is about 133,000 square feet. Rent averages $90 a square foot with a range from about $50 a square foot to about $225 a square foot for some of the smallest stores.

Grand Central isn't your typical mall. It isn't really a mall in the conventional sense at all, Marshall points out. For one thing, it doesn't have a conventional anchor such as a department store. But it doesn't really need one. "We have 500,000 people a day coming through here. Transportation is the anchor," she said.

Another atypicality is in the balance of retail. Most malls have a lot of stores and a relatively small food court. In Grand Central, 70% of retailers offer food. That includes a large contingent of restaurants, again with a strong local representation. In addition to the world famous Oyster Bar, another legendary Grand Central restaurant is Juniors, which operates a satellite location in the terminal providing the food and, especially, the cheesecake that has made it a Brooklyn institution.