One of the week’s biggest stories was Hudson’s Bay Co.’s decision to sell its 12-story, 676,000-square-foot Lord & Taylor flagship in New York City, for $850 million, to co-working office space startup WeWork. Lord & Taylor will continue to operate on 150,000 square feet of the building’s ground floors via sublet, while upper levels will house office space subleased by WeWork to its members.
Manhattan icon Lord & Taylor's Fifth Avenue store has been a fixture on the famed shopping street
Hudson’s Bay will use some of the proceeds of the sale to pay off debts.
The story is part of a larger downsizing trend in the industry, which is seeing retailers do more with less space.
It’s also a nod to the growing importance of mixed use. For example, Hudson’s Bay CEO Richard Baker told Business of Fashion that the Lord & Taylor store was planning to target the employees at We Work’s offices. Most WeWork users are Millennials, a demographic department stores would dearly love to convert to loyal customers, he added.
“This is a whole new chapter,” Baker said. “We’re going to have cross marketing between the WeWork members and our businesses and customers... making our department stores interesting and important parts of the community, and that’s what we’re after. That’s a really big part of this transaction and that was our primary goal.”
The experiment doesn’t end in New York City. Hudsons’ Bay and WeWork plan to divvy up space in some of the retailer’s other far-flung properties, which amount to 61 million square feet of space throughout the U.S., Europe and Canada.
Bruce Batkin, chief executive officer of Terra Capital Partners, a New York-based commercial-property lender told Bloomberg a lot of commercial real estate is being reconfigured to match consumers’ changing life habits. Retail and office layouts are shrinking.
“People will continue to shop,” Batkin said, “but they’re shopping differently, and that doesn’t require the same footprint.”
By Brannon Boswell
Executive Editor, Commerce + Communities Today
