As the city that never sleeps has slumbered for the past three
months, its typically thrumming heart of tourism, Times Square, has gone
quiet.
Nearly all of the ostentatious storefronts along 42nd Street,
Broadway and Seventh Avenue have closed their doors. The empty streets
of “The Bowtie” are a stark contrast to the thriving experiential retail
hub it was just a few months ago.
Roughly 380,000 pedestrians entered Times Square on an average day
last year. Since the pandemic hit New York, its foot traffic is down
90%, according to the Times Square Alliance, which tracks pedestrians
with a series of cameras and monitors.
Much of Times Square’s success has to do with its experience economy:
since before commercial advertisements played on the sides of
skyscrapers and major clothing stores rebranded their shops as
experiential, Times Square has been an international marketplace for
experience. From the Broadway theaters along its streets, to its many
restaurants, to the blinding lights, people come to Times Square to
experience the commercial grandeur of New York.
“It’s what people who have never been to New York think New York
City is, and anyone who has been to New York has been there,” said
L&L Holding Co. Managing Director David Orowitz, whose company is
developing a $2.5B project in Times Square dubbed TSX Broadway.
Now, as the deadly coronavirus has kept the city on lockdown despite
many other parts of the country beginning to reopen — and tourism
expected to take years to recover fully — the experiential retail hub’s
typically mobbed streets and stores have become a potential hazard,
rather than a help, to its outlook.
“With the pandemic, all bets are off,” said Priya Raghubir, a
professor of marketing at New York University’s Stern School of Business
and an expert in consumer psychology. “Because an experience requires
interpersonal proximity.”
Fifty percent of Times Square’s foot traffic comes from tourists,
according to the Times Square Alliance. Tourism rates in New York City
have risen every year for the past 10 years, peaking last year when 80.1
million visitors came to the five boroughs, according to a report from
NYC & Co., a city entity that tracks tourism. Many stayed in New
York City hotels, 20% of which are located in Times Square.
Now, the U.S. Centers for Disease Control and Prevention recommends
postponing or canceling trips to New York City amid the crisis.
Globally, tourism has taken a huge hit. Faced with stagnant business and
dismal tourism projections for the rest of the year, the 452-room Times
Square Edition, a piece of Maefield’s 20 Times Square property, once
valued at $2.4B, closed its doors permanently only a year after its
grand opening.
Over the past five years, experiential retailers have taken Times
Square by storm and proved lucrative endeavors as online shopping
increasingly ate into brick-and-mortar profits. Last year, the demand
for spaces like this in Times Square kept going up. In fall 2019, Times
Square had the second-highest asking rent in the city after Fifth
Avenue, up 2% year-over-year at $1,889 per SF, according to the Real
Estate Board of New York.
Major national retailers have their flagship locations in Times
Square, branding their companies as experience-focused to hundreds of
thousands of daily potential customers, while developers have broken
ground on multibillion-dollar new experiential retail and hospitality
projects. The hands-on, close-contact experiences made shopping in Times
Square distinct, experts say.
In 2018, Levi’s moved into its 17K SF flagship store on Broadway
between 45th Street and 46th Street at Vornado’s 1535 Broadway, which
features customizable denim and accessories designed by local artists.
Hershey’s Chocolate World expanded in 2017 at Maefield Development’s 20
Times Square, where store-goers can create their own wrapped Hershey’s
bar. Krispy Kreme was set to open the doors of its new flagship, a 4,500
SF store at Vornado’s 1601 Broadway on the edge of West 48th, to
customers who could watch the famous doughnuts be made via a glaze
waterfall. McDonald’s opened its largest location, a 24-hour restaurant
at 1528 Broadway with customizable order stations and menu items not
offered anywhere else in the United States, a year ago.
While spaces for retail in other parts of the city lost value,
developers have bet that retail space in Times Square will remain in
high demand, even as several traditional retailers, such as Old Navy and
Gap, have looked to move out.
New transactions before the Pandemic showed the real estate world was
optimistic about the area’s future. In addition to TSX Broadway,
L&L’s 550K SF hotel, experiential retail and entertainment project,
Soho Properties is building a $350M, 234-room, Jimmy Buffett-themed
Margaritaville Resort, which was set to open in the fall. Times Square
has already taken a hit as a result of the virus.
CBRE’s Q1 report, which took into account the first two weeks of the
city’s shutdown, showed asking rents had fallen 15.7% year-over-year in
Times Square, from $1,955 to $1,647 per SF, pushing the average down
below the $1,800 threshold for the first time since 2011. The report
found that the rent prices were driven down in part by an “increasingly
cautious market” and an uptick in retailers in the area looking to
sublease their space.
When the city is allowed to reopen, it is unclear how these
retailers can provide the same valuable experiences to the customers
that show up.
“We’re always asked ‘What is the new normal going to be?’” Times
Square Alliance President Tim Tompkins said. “The honest answer is it’s
extremely difficult to say, because every week there seems to be a new
set of facts and figures on how people are approaching this, not only in
the 50 states but around the world.”
Retailers in Times Square have been drafting safety guidelines for
their stores to go into effect once they are reopened. Nike Consumer and
Marketplace President Heidi O’Neill told Good Morning America that its
Niketown store between Fifth and Madison avenues will undergo strict
cleaning procedures and create signs to help enforce social distancing.
Beauty store chain Sephora has a Times Square location at the ground
floor of Vornado’s 1535 Broadway. Before the coronavirus, the retailer’s
signature was makeup available for customers to sample and try
throughout the store. The company has released new guidelines that
eliminate testers completely and implement a capacity re in the store.
Sephora didn’t respond to a request for comment on how the new
guidelines would impact its capacity levels at the Times Square
location.
Tompkins said it is hard to predict the future because the best practices change every day.
“Some of the key variables are the levels of testing, degrees of
pre-testing outside of retail venues, whether its with heat guns or
something else,” he said. “A lot out there that is uncertain, everything
is really speculative in terms of what the answer is.”
In addition to the intentional decrease in store capacity, tourism
across the globe is expected to stay at unprecedentedly low numbers this
year. Without tourists, The Bowtie is in for a painful year. When
experiential retail does open at its full capacity again — likely once
there’s a vaccine or effective therapy — it will be a slow recovery,
Raghubir said.
“It will take a while for consumer confidence to build,” she said. “I would be surprised if it were to happen before 2022.”
Raghubir said a full recovery will take even longer.
“I fear that it will take time before consumers will be able to
jostle each other in a crowd, which is so much a part of an experiential
retail experience,” she said. “I think there is going to be fear
holding people back.”
She predicts that companies that will make it are those that have the
ability to absorb the cost of the loss that retailers in this area will
face: the major chains like McDonald’s, Taco Bell — which signed a 4K
SF lease for its alcohol-infused Cantina concept in Times Square this
year — and the Apple Store.
With the city’s reopening expected to start in the next two weeks,
the quintessential experience economy at the center of New York City
will soon awaken, turn on its lights and reopen its experiential
storefronts. Time will tell how it adjusts to the world that changed
while it was asleep.
Orowitz believes that once the medical risk is over, the area and its experiential retailers will bounce back.
“A lot of people doing business in Times Square are going through a
lot of pain now,” he said. “But I think that the infrastructure is
there, the demand is still there, the people will still be there, and I
think that when the health risk is gone, business will come back
quickly.”
People will still continue to want to come to New York, he said, and that means a visit to Times Square.
“People are still going to want to be entertained, people are still
going to want to come and interact and have experiences,” he said. “None
of that changes, so the actual activities at the building don’t really
change, because brands are still going to want to advertise to people
through signs and stage and present experiences to them that they can
only have in Times Square.”
https://www.bisnow.com/new-york/news/retail/times-squares-experience-
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