Is Amazon's monopoly of online retailing about to transform Times Square into a ghost town?
As online sales cannibalize ever more traffic - and sales - from legacy brick and mortar stores, even such traditional foot traffic meccas as Times Square are starting to feel the heat, as brand name retailers flee, leading to what Bloomberg called "turmoil" at one of the world's busiest locations.
Take Gap and Cover Girl, which are among merchants looking to leave stores in the district, where companies have historically been willing to swap high rent payments for daily exposure to hundreds of thousands of tourists and commuters.
But as more shopping moves online and bricks-and-mortar spaces shrink, Bloomberg reports that real estate brokers are on the hunt for new tenants to occupy a pair of adjacent flagship stores at 1530 and 1532 Broadway - one for Gap and one for its discount brand Old Navy.
Additionally, new space is also available right next door, at 30 Times Square, where beauty giant Coty opened its first-ever Cover Girl store a little more than a year ago, and which now appears to be on the way out. Those come on top of a four-story flagship at 1551 Broadway that American Eagle Outfitters may depart.
“Some retail is just antiquated,” said Brett Herschenfeld, who oversees the retail unit of SL Green Realty Corp. It “hasn’t evolved with the times and they either fix it to the meet the consumer segment or they’re closing stores.”
To be sure, while Times Square hasn’t been hit as hard as other neighborhoods by mushrooming vacancies, asking rents have slipped and some of the district’s largest merchants, including Toys “R” Us, have shuttered stores in recent years. Others are evaluating whether their outsized spaces are the best way to generate sales while giving shoppers the experiences they flock to the area for.
“The most successful approach to Times Square will be to think outside of the large box,” said Phil Granof, chief marketing officer of NewStore, operator of a mobile e-commerce platform that works with physical stores. “Breaking it down into smaller pieces, there might be more value there.”
Among the giant currently occupying space on Times Square are Gp, which has roughly 80,000 square feet at the two locations in Times Square, with leases that run through 2032; Coty has about 10,000 square feet across five floors that is being marketed for sublease through 2021. And while the buildings all come with massive digital billboards, in an era when advertising has shifted to Instagram and other social media, companies are questioning the cost of pushing their wares in Times Square.
"The value that brands will pay for the exposure in Times Square on a permanent basis is under some pressure,” said Michael Hirschfeld, a retail broker at Jones Lang LaSalle Inc. “A lot of mass-market types of consumer brands are now reaching you directly on your phones or Instagram."
For two retail giants, the warm glare of Times Square LCD lights, has outstayed its welcome: Gap, on the hunt for a permanent chief executive officer after Art Peck was fired in November, is closing stores as it struggles to revitalize a label that has fallen out of step with shoppers. Old Navy has been a bright spot for the company, but that brand has also faced challenges in recent quarters, including increased competition from other discount chains.
Yet while Times Square may be losing its luster for some companies, Bloomberg notes that there’s still plenty of interest in the area from current and prospective tenants - and that shows how powerful it remains for retailers, according to Steven Soutendijk, a broker at Cushman & Wakefield: "It’s not just about marketing and branding anymore,” he said. “It’s about the footfall and the shoppers that are there."