Prior to Sept. 11, Borders Group Inc. was sporadically searching for an additional downtown location. Now, however, with the loss of its 40,000 sq. ft. store at the former World Trade Center, the book store giant has intensified its search for a 25,000 sq. ft. space in the financial district.
“I don't see this as replacing the WTC site — it's almost by definition irreplaceable,” said Dave Rayner, Borders' regional director of real estate for the Northeast. “It's our task to fill the need of the marketplace now that the WTC is no longer there.” He explained that the New York marketplace and traffic patterns have changed, and Ann Arbor, Mich.-based Borders wants to position a downtown store to fulfill the needs of the emerging market.
Assessing the retail loss
In all, 75 retailers occupied a total of 472,000 sq. ft. of space in the Westfield Shoppingtown WTC, the retail component of the twin towers located on the concourse level. Westfield America Inc., the Los Angeles company that bought the 99-year lease on the WTC last summer along with Silverstein Properties, owned the mall.
According to Westfield America, the mall generated annual sales of $900 per sq. ft., about $500 more than the national average of $341 per sq. ft. recorded by the International Council of Shopping Centers.
But even with the loss of its top-producing retail center, Manhattan hasn't fallen from its position as the premier retail location, said Faith Hope Consolo, vice chairperson of Garrick-Aug Worldwide, a retail brokerage firm headquartered in New York. For displaced tenants of the WTC, replacing some of the sales volume and traffic lost due to the terrorist attack is imperative, she explained.
Consolo, who works with displaced WTC tenants, noted that accessory, beauty and other retail players are seeking sites in Midtown and the Upper East and Upper West neighborhoods of Manhattan. The leases are out, waiting to be signed. “We expect to close those deals shortly,” she said.
A space to call home
Some service-oriented tenants, such as pharmacies, commercial banks and food stores, will have to move quickly to find a new spot downtown, said David La Pierre, director at Insignia/ESG in New York. He explained that service retailers must re-establish normal business routines quickly, or regular customers will find a new place to buy toiletries, bank or shop for groceries.
Other displaced tenants are taking a more patient stance, waiting until WTC rebuilding plans are revealed before deciding to relocate.
“You'll find that certain players just won't be able to replace a unique center like the WTC, which had the benefit of transportation and density of office property,” La Pierre said. “You can't duplicate that traffic by taking another space in the downtown market.”
Indeed, 40,000 office workers, in addition to nearly 150,000 tourists and commuters, populated the WTC each day. Replacing that traffic poses a challenge. According to Consolo, displaced retailers at the WTC may need to build two or three stores to recapture the sales lost when the twin towers collapsed.
Prior to Sept. 11, rent for retail space at the former WTC ranged from $175 per sq. ft. to $200 per sq. ft., but space in Midtown runs more than $200 per sq. ft. That means Midtown is not a viable option for many retailers, La Pierre said.
For Borders, the challenge is to find a location with floor plates large enough to accommodate the store's bulk, as well as steady pedestrian traffic, Rayner said.
“The key to the business in Manhattan is the same as elsewhere in the Northeast,” he noted. “You want to find markets where you have readers that are underserved.”
Borders now has two stores in Manhattan — one at 57th Street and Park Avenue, the other at the Kips Bay Complex at 30th Street and Second Avenue — and is ready to add another store to serve the downtown market.
According to Rayner, Borders also wants to rebuild a store at the former WTC site. The company is working with its former landlord to stay informed on the types of real estate that will be built at ground zero. Although rebuilding a Borders store in the new complex will be a priority, Rayner estimates that plan won't materialize for at least three to five years due to the long cleanup process and the uncertainty of what will ultimately occupy the site.