In recent weeks, we have discussed the changing face of retail in NYC due to changes in technology, consumer buying habits, as well as shifts in the real estate market. We have also discussed the (unintended) effects that landmarking can have on iconic outlets like the Strand Book Store. Some of New York’s most famous department stores sit at this uncomfortable intersection—namely Lord & Taylor, Barneys, and Saks Fifth Avenue. The trio are at various stages of decline and dissolution. Lord & Taylor’s NYC flagship building has been taken over by WeWork (another problematic operation we will be discussing again soon), Barneys declared bankruptcy last week, and Saks announced Monday that a private consortium was hoping to take it private from the Hudson’s Bay Company and restructure the firm. [1]
The department store was a remarkable invention of the nineteenth century, and New York’s most famous stores stand alongside Harrod’s in London and Le Bon Marché and Galeries Lafayette in Paris as ideal-types of the department store form. Department stores reshaped consumption habits during that era and catered to the growth of the middle class as the Industrial Revolution transformed virtually all aspects of life. But now, more than a hundred and fifty years on, department stores have found themselves in a tough bind. For famous stores like Saks or Harrods, their public and sentimental value means that many people, even if they do not regularly shop there, would be unhappy to see them close. At the same time, the realities of declining sales and foot traffic has taken these stores to the financial brink.
Repurposing the vast spaces has proven a challenge, with WeWork shelling out $850 million to become the lone tenant in the 660,000 square-foot Lord & Taylor space. The space is more than twice as large as WeWork’s next largest lease and they have largely been unable to find tenants. The Financial Times reports that that the $1.5 billion buyout of Saks was at the low end of what Hudson’s Bay deemed acceptable. Minority shareholders may yet reject the offer, but if it goes through, the new owners will face a tough challenge to restore the store and brand to its former glory, especially as more and more luxury brands move their business into proprietary stores and ecommerce. The struggles of the landmark department stores to adapt to changes in the retail market thus make for a fascinating and eye-catching element of the wrenching changes visible in NYC’s real estate market.
[1] Platt, E. and Gray, A. (October 2019) Saks Fifth Avenue owner Hudson’s Bay agrees buyout deal from Financial Times https://www.ft.com/content/c234feca-f3fb-11e9-b018-3ef8794b17c6 Accessed October 23 2019