Vornado Realty Trust is responding to Manhattan's pent-up demand for big-box retail with plans to convert as much as 300,000 square feet of office property to accommodate the oversized chains. “Vornado will likely combine street-level and second-level retail in a multi-level format that will appeal to big-box retailers hoping to enter the Manhattan market,” says Banc of America analyst Daniel Oppenheim. The conversions could raise rents to $60-$80 per square foot, from $30-$40 per square foot as office space, according to Sandeep Mathrani, Vornado executive vice president of retail.

Vornado, which operates mainly in New York, New Jersey and Pennsylvania, is redoubling efforts to boost profits at its 14 million-square-foot retail portfolio, and expects to grow the division to 30 percent of its overall EBITDA from the current 15 percent. Acquisitions, developments and redevelopments will all play a part in the strategy.

Last month, Vornado bought Paramus, N.J.'s 900,000-square-foot Bergen Mall from Simon Property Group for $145 million and an estimated cap rate of 6 percent to 7 percent. “That's top dollar for a decidedly mediocre mall,” says Citigroup Smith Barney analyst Jonathan Litt. Vornado plans a major redevelopment and may de-mall the property, currently anchored by Macy's, Value City, Marshalls and a Saks Off Fifth outlet, into a power center.