Photo courtesy of Lord & Taylor
With rising rents and a national shift towards e-commerce, retail vacancies in NYC have continued to rise, especially in affluent areas like the Fifth Avenue corridor. Old-school department stores, which once served as cultural destinations where shoppers would spend entire afternoons, have been hit especially hard since they occupy such large sites. One of Midtown’s most iconic, the 103-year-old Lord & Taylor flagship at Fifth Avenue and 39th Street, has decided to stay afloat by selling its 676,000-square-foot Italian Renaissance building to WeWork for $850 million. The co-working company will relocate its global headquarters to the landmark, reports the Times, leaving less than a quarter of the space, roughly 150,000 square feet, to Lord & Taylor.
In 2006, real estate investor Richard Baker bought Lord & Taylor; two years later he bought the Toronto-based Hudson’s Bay company, into which he folded the department store, along with Saks Fifth Avenue in 2013 and Gilt Groupe in 2016. But over the past year, Hudson Bay’s stock prices have fallen by more than a third, likely the effect of e-commerce.
In a likely attempt to counter the loss, Baker entered development talks this past April to construct an office and residential tower atop Lord & Taylor’s flagship. However, it’s now clear that he opted instead to sell the building. In a statement, Baker said, “This partnership places H.B.C. at the forefront of dynamic trends reshaping the way current and future generations live, work and shop: the sharing economy and urban and suburban mixed-use real estate planning.”
WeWork recently set up WeWork Property Advisors so that it can purchase property instead of leasing, thereby profiting from real estate value increases. Adam Neumann, the company’s co-founder and chief executive, said, “Retail is changing and the role that real estate has to play in the way that we shop today must change with it.”
In addition to converting the building into office space and leasing the bottom floors to Lord & Taylor, WeWork will invest $500 million into Hudson’s Bay, giving the company “more than $1 billion in fresh capital to pay down debt and bolster its cash holdings,” according to the Times. They will undertake similar top-floor conversions at some of Hudson’s Bay’s other 480 department stores, though in these cases WeWork will continue to rent. The hope is that by attracting millennial office workers, HBC’s stores will see a boost.
Lord & Taylor will operate as it currently stands through the 2018 holiday season, after which time WeWork will begin the renovation. A company spokesperson said the store’s famous holiday window displays will still go up this year.
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Neighborhoods : Midtown