Anchor Tenants Evolve as Urban Retail Changes, Says ULI Panel
- Feb 20, 2008
Department stores are the anchor tenants of the past, particularly in New York City, contended top retail experts at Urban Land Institute’s “Redefining the Anchor” panel discussion, held this morning in Manhattan. The panel focused on the evolving role and value of retail in urban, mixed-use development. In order for retail to succeed in urban areas, developers must provide a 24/7 environment that includes residential, office and perhaps a hotel, stadium or transit-oriented development, noted Kate Coburn, principal for Economics Research Associates. “With the cost of construction, retailers can’t just depend on residential anymore,” she said. “They are looking for mixed-use.” And anchor tenants are a vital part to these mixed-use developments, especially in residential attraction. “Savvy buyers want to know who the tenants are below them,” noted Louis Dubin, president & CEO of The Athena Group L.L.C. “The anchor tenant can push the velocity of sales.” And when residential sales are strong without the anchor tenant, the developer must think of the best retail options for those tenants. For instance, in the Time Warner Center, Robert Futterman (pictured), chairman & CEO of Robert K. Futterman Associates, noted that the initial retail push was focused on a 140,000-square-foot high-end department store tenant with complimentary retail. But tenants started talking, and the developers repositioned the asset for smaller anchors, including a Whole Foods. And this vertical retail success can be recreated, he noted, especially in the World Trade Center development, which has “real opportunity for an urban masterpiece.” The Empire State Building is also taking the opportunity for a reconfiguration, noted James Conners, general manager of the building, who said that it is trying to be as flexible as possible to align itself with aspirational brands. “If it means taking a haircut on rent, we’ll do it,” he said. “It’s a quick pay back and will increase office velocity.” The panelists also disused trends in specific parts of the city. In Lower Manhattan, for instance, retail is still aimed at the office worker despite all the new residential projects, since the residents do not work there during the day and tend to frequent other areas of the city at night. “The tenants are serving office very well, but we have to find common uses, although that’s mostly in food,” Coburn noted. She said the market has room for small service providers. The Meatpacking District is now on retailers’ radars more so than SoHo, which is now moderating, Futterman pointed out. And up north in Harlem, retail remains strong, especially in the eastern and western parts of the neighborhood, as well as around the Metro-North rail station. Columbia University is also slated to do great things for the neighborhood, Dubin added. Retail will follow whatever is built in the Hudson Yards project, “but don’t expect to see an anchor department store,” Futterman said, noting that it will take about 10 to 15 years to fill in the project. “It won’t be a vibrant mecca for shopping.” On the other hand, the James A. Farley Post Office redevelopment will have more potential, as it will service commuters. One purported trend is residential over retail, “but it won’t work in most places,” Dubin claimed. “You have co-tenancy issues, a higher cost of building and different codes (to deal with).” The concept might work in higher-income areas, but the market cannot build such product at a low enough price to make it worthwhile. Peter Slatin of real estate publication The Slatin Report moderated the panel.