Manhattan a tight fit for big boxes - Manhattan, New York, large discount stores

Discount Store News, April 3, 1995 by James Mammarella

NEW YORK - The entry into Manhattan's Penn Plaza by Kmart will be a milestone in the city's retail evolution. For mass merchants, it may also turn out to be the crest of a wave. Even though New York's political leadership is attempting to open up more real estate for discounters, the reality on the ground is that big box space is a rare commodity.

By the time Kmart opens for Holiday 1995, many of the choice spots in The Big Apple will be taken.

Stephen Freidus, president of Andover Realty, brokered the Kmart deal. His team had to assemble 140,000 sq. ft. from space leased by 27 different tenants, and most of them demanded assistance in relocating. That tends to be the rule in Manhattan, he said, where there are scores of large enough buildings, but most are leased to a multitude of tenants.

Zoning changes are another issue, yet even aggressive proposals aimed at luring mass new sites. Mayor Rudolph Giuliani is backing a new policy to cut red tape involved in rezoning industrial areas to commercial space in the five boroughs. In Manhattan, most industrial-zoned land is west of Broadway and south of 14th Street. The Soho area, for example, used to house thriving printing and garment industries - but today much of the space is broken up into boutiques, galleries, eateries and apartments. (As New Yorkers in any neighborhood can tell you, just finding a 300-sq.-ft. studio apartment is no easy matter.)

"If you're talking about the big box users," Freidus said of Giuliani's initiative, "it won't make room for that much business in Manhattan. It's hard to assemble a large amount of space."

Besides the challenge of consolidating leasable space under one roof, there is the minefield of local politics.

Upper East Side residents, bent on keeping their plush neighborhood a quiet one, are dragging Toys "R" Us representatives through various hearings regarding the appropriateness of turning a dormant warehouse into an 80,000-sq.-ft. discount superstore. Herman's Sporting Goods recently announced it had ceased exploring a store on the Hudson River near midtown, mainly because community opposition to the Chelsea Piers redevelopment plans had reached a level where it was obvious that nothing much would be done for years. (Entrepreneurs want retail-driven development; West Side activists want a park.)

Retail development by large stores in Gotham still occurs largely in the traditional areas - the Broadway spine connecting Union Square, Herald Square, Times Square and Columbus Circle; Fifth Avenue and Ladies' Mile along Sixth Avenue in south Chelsea, below 23rd Street. In all locales, prime retail space has been snapped up.

Ladies' Mile has proven the biggest draw to discounters, just as it housed the main concentration of department stores a century ago - in several of the same buildings. Mass merchants continue to jockey for position here: Bed Bath & Beyond, Staples, Barnes & Noble and Today's Man are thriving. On the way are T.J. Maxx, Burlington Coat Factory, Filene's Basement and Old Navy, the discount division of The Gap.

A few blocks away, retail space at Union Square is also going fast. Toys "R" Us, Bradlees, Barnes & Noble and regional consumer electronics chain The Wiz have each staked out one side of the square. A vacant corner lot will reportedly be developed and leased by The Sports Authority and Caldor within two years.

A few blocks south of the square, Kmart is said to be considering a lease for the former Wanamaker site at 8th Street and Broadway. Freidus said he had no connection to or knowledge of such reports. Close by the Washington Square campus of New York University in Greenwich Village, this structure is now an office building with several floor available, each about 60,00 sq. ft. "It's a very prominent building," said Freidus.

Herald Square, home to "The World's Largest Store," Macy's, is also home to the A&S Mall, where Federated will substitute a Stern's department store as it retires the A&S name after well over a century in service. Another multi-level mall, formerly the site of a landmark Korvettes, is anchored by Toys "R" Us and a small Kids "R" Us. The rest of Herald Square is likely to remain a patchwork of diminutive shops, although an extremely high-grossing The Gap will approach superstore size as it adds a second floor.

Times Square is no place for megastores - at least not yet. The city's redevelopment of the district includes plans for four office towers between Times Square and 8th Avenue on 42nd Street, where The Port Authority terminal provides a stratospheric volume of foot traffic. Although a lot of acreage is involved, with some structures already razed, developers may feel that they can generate more rent from smaller specialty retailers.

Further up Broadway, any major development at Columbus Circle is still years away as movers and shakers continue to tussle over the fate of the New York Coliseum, which dominates the site.

On the trendy Upper West Side, where Filene's Basement and Today's Man have set up shop in the 79th Street area, there is little in the way of big box real estate. Today's Man occupies a 34,000-sq.-ft. site, which was a former movie theater. Other theaters in this zone have either been upgraded or demolished. Most other structures are reserved for apartments and small retail. In one exception, Barnes & Noble has carved out a sprawling store.