Big-box retailers target Manhattan.
During the past two years a number of these retailers have opened stores in the outer boroughs, but it was only recently that the big boxes have entered the heart of the city in a meaningful way.
Some big-box retailers, such as Home Depot Expo and Bed Bath & Beyond, have already established a presence in Manhattan. This summer, Home Depot will open two locations, an 83,000-square-foot store at 59th Street and Third Avenue, and a 108,000-squarefoot store at 23rd Street near Fifth Avenue. Bed Bath & Beyond recently signed a lease for a 53,000-squarefoot store at 1930 Broadway.
Many of the big-box retailers had avoided Manhattan for a number of reasons, the most important of which is the scarcity of the large contiguous retail spaces required for their preferred store layouts. Finding a site that can support a 20,000-square-foot or 40,000-squarefoot shop is a challenge, but finding a location that can house a 100,000-square-foot or larger store is even more difficult. Big box retailers also hesitated to embrace Manhattan because of the dearth of large parking lots, which are typically considered crucial to the success of any large-scale retailer.
With the construction of new residential and office buildings taking place throughout the city, many large national retail chains are finding the big spaces they require. To make up for the lack of parking lots they expect for suburban locations, Home Depot and other large retailers are planning to offer delivery service to residents.
In the past, the big-box retailers have also been reluctant to pay the costs associated with opening a store in Manhattan, where building owners demand retail rents ranging anywhere from $100 to $200 per square foot to as much as $400 or $500 per square foot. The high cost of labor, real estate taxes and utilities also dim prospects for making a profit in Manhattan.
Despite the sky-high rents, Manhattan has proven to be too important for retailers to ignore. The public companies in particular are opening stores in New York to draw the attention of Wall Street. Big-box retailers also recognize the untapped demand from Manhattan residents that have had to travel to the outer boroughs or the suburbs to shop at stores like Home Depot Expo or Bed Bath & Beyond.
Manhattan will likely see more big-box development as other major retailers enter the market, especially if the delivery service for large and bulky products proves successful. Target is eyeing a space as large as 200,000 square feet, Kohl's is looking for 120,000 square feet and Costco is mulling 150,000 square feet. This may be only the beginning.
BY KAREN BELLANTONI SENIOR MANAGING DIRECTOR ROBERT K. FUTTERMAN & ASSOCIATES, LLC
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|Title Annotation:||Review & Forecast|
|Publication:||Real Estate Weekly|
|Date:||Jan 28, 2004|
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