NINE HUNDRED DOLLARS per square foot, three times the national average. That is the revenue stream that Westfield America Trust was generating at its underground mall in the World Trade Center complex. The question now is whether that enviable sales number can be duplicated as the site is redeveloped — and whether a new complex will help spur more retail development Downtown, a vital ingredient to reinventing an aging office district into a vibrant mixed-use commercial real estate market.
The outlines of the new development on the WTC site won't be known until December at the earliest (see related story, Page 16), but none of the proposals under consideration would replicate the unique conditions that made the World Trade Center Mall so successful. The center was located in a series of concourses under the trade center plaza, which created a superblock that isolated the WTC from the rest of Lower Manhattan. It sat atop three subway lines and a commuter rail depot and below the office towers that housed 50,000 workers and attracted 150,000 visitors a day.
In other words, the 427,000 sq. ft. Trade Center Mall had the ultimate captive audience. Between the towers' workers, tourists, commuters passing through and shoppers from other parts of Downtown looking for upscale retail shops, some 200,000 people poured into Westfield's 75 stores every day.
“The World Trade Center area was very unusual in terms of the amount of traffic — the convergence of the office workers in the buildings, the subway and other public transport systems, and the fact that it was also a tourist site,” says Wendy Liebmann, president of New York-based WSL Strategic Retail.
In fact, Michael Beyard, senior fellow with the Urban Land Institute (ULI) in Washington, D.C., says retail at the WTC “worked because you had to pass the shops to get in and out of the building to reach any form of transportation. So in that sense, thewas brilliant.”
By mid-2001, the underground mall had blossomed into such an important revenue source that when Silverstein Properties was negotiating with the Port Authority of New York and New Jersey for a 99-year lease on the World Trade Center, Silverstein brought in Westfield America Trust, a member of Sydney, Australia-based Westfield Group, to run the retail operations. Westfield Chairman Frank Lowy inked a separatefor the World Trade Center's stores, which included tenants such as Sephora, The Gap and Banana Republic. Although the destroyed shopping center was a fraction of the office space lost, Lowy's stake in the WTC will affect how the site will be rebuilt.
Downtown's Retail Nucleus
Like Silverstein Properties, which is running into headwinds as it tries to replace all 11 million sq. ft. of office space, Westfield is also seeing signs of resistance. Of particular concern to the mall operation are plans for replacing the street grid in order to improve traffic flow and connect the community of Battery Park to the rest of Lower Manhattan. Rebuilding the grid could limit Westfield's ability to create a traditional, horizontal mall. In June, The Wall Street Journal printed a story in which community leaders raised concerns that Westfield was trying to limit the reconnection of streets to make space for its mall. Westfield managing director Peter Lowy insists that “We are not now, and never have intended to build a big-box suburban mall.”
If a more thorough grid is built, Beyard believes the retail portion of the site could come to resemble other high-end shopping districts in Manhattan, including Madison Avenue and Soho, where stores mingle with offices, apartment buildings and restaurants. “The old adage that a shopping center was separate and distinct from other uses is pretty much discredited,” he says. The best retail destinations “don't have a fence around them. They blend with other districts with other functions,” Beyard adds.
Lowy and Silverstein are said to have agreed to support reconnection of two main traffic arteries across the site. Ideally, the design would generate a continuous flow of customers between stores, they say, and the streets reconnecting the grid would be pedestrian-only.
Will that be enough to restore lofty retail sales of $900 per sq. ft.? Robert K. Futterman, CEO of Robert K. Futterman & Associates, a Manhattan-based retail real estate firm that represents Casual Corner and other former WTC tenants, fears it will not. “Any time you have that volume and foot traffic, you'll get better tenants,” Futterman says. “It's more challenging if it's street-front, because you lose the transportation hub element.”
Sketching out this point, Futterman explains, “If you look at the streets Downtown — Broadway, Water Street, John Street, Maiden Lane — there are no national retailers to speak of,” primarily because the shopping week comprises only five days, with little overflow into nighttime business.
A mall that takes shape around the new transportation hub — should that materialize — could also be a solution. A draft of the Lower Manhattan Development Corp.'s “Principles and Preliminary Blueprint for the Future of Lower Manhattan” lists among the rebuilding goals the creation of a transit hub linking PATH, subway and regional rail services to lower Manhattan. Moreover, such a landmark “should include substantial retail shops, restaurants and services, possibly incorporating residential and commercial space,” according to the corporation.
“A transportation hub is just like the icing on the cake,” says retail broker Faith Hope Consolo, vice chairman of Garrick-Aug Worldwide, which represents former WTC retailers Papyrus, Godiva and Torneau. According to Consolo, being located near transportation hubs, such as subway stations or PATH stations, bumps up traffic by 15% to 20%, which in turn translates into increased sales.
But consumers walking past stores on their way to and from trains and subways will not be enough to sustain Westfield. Susan Kurland, a senior director at Cushman & Wakefield, warns that the space must be great enough to attract a critical mass of national retailers.
In the meantime, Liebmann points out that former WTC retailer Ann Taylor is the only national retailer to initiate new business downtown because its new Ann Taylor Loft store, located at 2 Broadway, is not reliant on office workers for business.
Thanks to Lower Manhattan's growing residential community, “there was still an opportunity to open that space,” she says. “And I think for the most part, that's a very everyday kind of retailer that has a fairly broad appeal in terms of price point and design and it still had a legitimate home that wasn't depending on a huge amount of tourist traffic.”
In other words, Ann Taylor Loft capitalizes on demographics that are independent of tourism, if not completely independent of transportation. Nearby Battery Park City, which boasts market-rate residential units, is home to approximately 10,000 consumers, many of them young professionals.
Kurland says that new entrants like Ann Taylor Loft will be “few and far between” in such a street-front scenario. Currently, only The Rouse Co.'s South Street Seaport and bargain department store Century 21 are standout successes in a neighborhood not known for its retail amenities. Both rely heavily on tourists.
Potentially, the WTC site can once more have it all. The planned memorial is likely to be-come a major tourist destination. Even if a new Grand Central Station does not materialize, at a minimum there will be the same amount of transportation there. And there will be office workers. The question is whether these ingredients can be reintroduced in sufficient quantities to get back to that magical sales mark of $900 per sq. ft.
David Sokol is a New York-based writer.
AT A GLANCE: The World Trade Center Mall
(As it appeared before Sept. 11)
Retail Space: 427,000 sq. ft.
Visitors: 150,000 daily
Sales per sq. ft.: $900
Source: Westfield Corp.
AT A GLANCE: Downtown Demographics
(As of Sept. 11)
Downtown Manhattan population: 25,000*
Average Income: 76% earn more than $90,000 annually; 25% earn more than $210,000 annually
*Number of residents Downtown, excluding Battery Park.
Source: Downtown Alliance