As Manhattan's 2.1 million sq. ft. AOL Time Warner Center nears completion, an odd thing has happened in the preleasing of the ambitious mixed-use project. While nearly all of its office space is rented and half of its pricey condos have been presold, the big success — at least on paper — is its retail component. Some 90% of the 500,000 sq. ft. space has been preleased to top-line shops and restaurants in a city where developers have tried and often failed to make vertical malls work.
“There's no place in the world that I can imagine is a greater challenge of making this work than right here in New York,” concedes Kenneth Himmel, president and CEO of Related Urban Development, a lead development partner in the center, and the man who put vertical retailing on the map with's Water Tower Place.
The challenge, he acknowledges, is getting pedestrian traffic circulating through the project'sand retail space. According to the developer, Related Cos., the tenant roster includes Tourneau, Williams-Sonoma, Coach, Hugo Boss, Borders Books, Aveda, Armani and Whole Foods Market.
The idea is to make Columbus Circle, formerly a retail no-man's land between midtown and the Upper West Side, a destination for high-end shoppers. Annual rents range from $500 per sq. ft. for ground floor space to $100 per sq. ft. for the upper floors. That's still less than the average retail rent of $650 per sq. ft. at Madison Avenue and 57th Street, but AOL Time Warner Center tenants will need strong sales to justify their stake in the building.
Will New Yorkers come? “Every attempt at vertical retail in Manhattan has failed. New Yorkers are spontaneous, and they like to run in and out very fast,” says Faith Hope Consolo, vice chair of Garrick Aug Associates, a Manhattan-based retail. She counts Herald Square's Manhattan Mall and Fifth Avenue's Trump Tower as two failed attempts at vertical retailing. However, she adds AOL Time Warner Center has a good shot at reversing the trend, given its roster of stores.
Himmel knows how hard this kind of retail project can be. He developed Water Tower Place, the 74-story office/retail complex that helped move the center of upscale retail in Chicago to the near North Side. Water Tower Place opened in 1976 with retail anchors such as the Lord & Taylor and Marshall Fields, but took three years to take off. “People didn't shop vertically then,” he says. “But when it did take off, it was a home run.”
Now, according to Himmel, 25 million people pass through the Water Tower's eight floors of retail every year, and the center generates $700 worth of retail sales per sq. ft.
Unlike other Manhattan vertical retail projects that have failed, Himmel says New Yorkers will respond to this. “With a lot of these vertical projects, once you are inside them it's easy to get lost and disoriented,” he says. Not so with the Shops at Columbus Circle, with its central retail atrium aligned with 59th Street's edges. The main entrance is covered in a 180-foot high glass wall, which projects the streetscape into the interior.
There are six levels of retail space all told, two of them below ground. But as Himmel says, “You don't build retail straight up because you want to. You do it because you have to.”