- Hudson Yards developers Related and Oxford are offering Neiman Marcus's nearly 200,000 square foot store - along with other space - to office tenants, according to marketing materials reviewed by Business Insider.
- The effort is another sobering turnabout for the city's retail market, which has been battered by the coronavirus lockdown and, in more recent days, looting during protests over the death of George Floyd at the hands of Minneapolis police officers.
- Related and Oxford are seeking to reposition the space to cater to a more robust segment of the commercial real estate market, the office sector, where despite questions over the future of the workplace, tenants have continued to take space.
- Offering the 380,000 square foot block, almost 40% of the mall space, signifies a major retreat from retail exposure for the developers, which once imagined the Hudson Yards as the city's apex shopping district.
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The Related Companies is preparing for life at the Hudson Yards without Neiman Marcus, the bankrupt department store that anchors the mega-mall at the $25 billion mixed-use project on Manhattan's West Side.
Related and its partner in the jumbo-sized development, Oxford Properties, are marketing Neiman's 190,000 square foot space along with additional retail space abutting the store for lease to an office tenant or collection of tenants.
In total, Related and Oxford are making 380,000 square feet available to potential office takers across three floors at the top of the mega-mall, according to marketing materials reviewed by Business Insider on Friday that advertise the offering. The space represents nearly 40% of the mall's square footage and could signify a major retreat by two big players in the city's real estate industry from exposure to the retail market at a time when malls across the country have struggled for survival in the aftermath of the coronavirus crisis.
The effort to solicit office tenants for the space could represent a costly reversal as well for the developers, who lavished $80 million on the cost of building out Neiman's store in order to woo the retailer.
In addition to the Neiman space, the offering includes square footage occupied by other retailers, including the Dallas based luxury apparel chain Forty Five Ten, Louis Vuitton, Chanel, and the food tenants Momofuku and Bouchon Bakery. There has been speculation that Forty Five Ten, which occupies 16,000 square feet at the mall, may not reopen after stores it operates in Texas, as well as its online sales platform, remained shuttered despite coronavirus lockdowns being lifted in that state.
Food retailers and restaurants across the city, meanwhile, face a daunting challenge that has threatened their existence as social distancing protocols and diminished foot traffic prevent them from accommodating and serving enough diners to recover financially from the pandemic.
A spokesman for Related declined to comment. A spokeswoman for Oxford Properties has not responded to a request for comment. A spokesman for Neiman Marcus also did not immediately respond to a request for comment.
"Related clearly sees they have the chance to make more money from an office user than they'll get from having Neiman Marcus there," said Gene Spiegelman, a principal at the retail advisory and brokerage firm Ripco Real Estate. "Related could make substantially more rent from this space as offices and having the 1,000 of more office workers that could be accommodated in this space will be healthier for the complex and the other stores in the mall than the relatively few shoppers that Neiman draws."
Neiman Marcus Group, the parent of the eponymous department store as well as the luxury store Bergdorf Goodman, filed for chapter 11 bankruptcy last month after failing to make a payment on a portion of $5 billion in corporate debt it holds - a mountain of financial obligations that became untenable as its revenue plunged during the coronavirus lockdowns. The company has not yet revealed whether it will try to cut ties with any of its 43 Neiman Marcus stores around the country.
In offering the department store's space for lease, Related and Oxford are evidently preparing for the possibility that the brand's Hudson Yards space could be on the chopping block. The developers could also be seeking to head off negotiating leverage that Neiman could hold during the bankruptcy process to renegotiate its already-attractive lease at the Hudson Yards.
Related and Oxford spent $80 million building out Neiman's store and receive a small cut of the store's revenue in place of rent for the first five years of the brand's lease, generous terms that were first reported by Business Insider.
In seeking to reimagine what was once the lynchpin of the Hudson Yard's project's one million square foot mall, Related and Oxford are attempting to tap into what they hope will be a more robust segment of the city's commercial real estate market.
Although office leasing has slowed, major tenants have continued to commit to deals. The online video platform TikTok, for example, just committed to over 200,000 square feet at 151 West 42nd Street. Facebook, meanwhile, is expected to soon complete a lease for over 700,000 square feet at the Farley Building, a block away from the Hudson Yards project.
On Friday, the real estate services and leasing firm CBRE reported another encouraging sign for the office market. Sublease space, offices that tenants make available to other occupants, especially during downturns, declined in April and May, even as tenants contemplate the future of the workplace post-Covid. About 340,000 square feet and 234,000 square feet of sublease space was added during April and May respectively, according to CBRE, down from the roughly 800,000 square feet of sublease space that has generally been added to the market on a monthly basis in recent years, the company reported.
In renderings, Related and Oxford reimagined Neiman's space as open offices with escalators joining the floors and a large outdoor terrace overlooking the Vessel, the chalice-like sculpture in the public plaza at the mega-project. The developers call the space "The Workshop" and state that it is a "campus for innovation at the heart of NYC's most exciting new neighborhood."
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