Checking the Math on New York City’s Commercial Real Estate Pipe Dream
By: Joel Epstein
Once upon a time, before there were dreams of a livable city with parks and protected bike lanes and bike share all over Gotham, there were things called department stores. For those who could afford to shop there, everyone had a favorite. My people shopped at Loehmann’s in Brooklyn where my Aunt Betty was a denizen of the Back Room. The family lore is that the “sales girls” would call my aunt and let her know what had come in. “We just got a Claire McCardle…” The Back Room was where shoppers found bargain prices on designer women’s clothing. But Loehmann’s Back Room wasn’t just for women. When he was single, a friend of my father’s liked to visit the Back Room because there were no dressing rooms and some of the women trying on bargains out in the open didn’t seem to mind the attention.
How things have changed. Decades before Amazon, department stores had already gone into decline. It has been years since the once grand department stores featured in period pieces like The Marvelous Mrs. Maisel were destinations for New Yorkers and tourists alike.
Does Macy’s tell Gimbel’s went the old adage, a rhetorical question that implied that business competitors don’t share their secrets. Now, we all seem to do the opposite, broadcasting our business plans on Twitter and Instagram. While there are few department stores anymore, for all intents and purposes, there are plenty of former stores that have now morphed into real estate companies. Remember S. Klein on the Square? Of course most of you don’t because you weren’t even born when it was redeveloped.
Sometimes it seems like everything has become a real estate play. For the companies lucky enough to still own their flagship locations, it is all about adaptive reuse of the space or selling the air rights for another odorless and colorless office tower. And sometimes both. But really it’s not just about the flagship. Whether you’re a Pep Boys in a suburban strip mall or a once grand department store on Fifth Avenue or in Herald Square, it’s all about the footprint. The question has become, what can you make of the location and what is the supposed highest use for the no longer economically viable store?
Which is why Macy’s plans for its Herald Square location should come as no surprise. Even though even those who failed high school math can tell you that it doesn’t pencil out, the real estate developers don’t seem to let the numbers and reality get in the way. We have seen this movie before.
Macy’s plans for an office tower is part of an unfortunate trend facilitated by an eyeless mayor and a defanged City Hall and planning department. Instead of B. Altman’s fate which converted the retailer’s landmark Fifth Avenue store into space for CUNY’s Graduate Center, Macy’s plan calls for 1.5 million square feet of office space in a glass and steel tower. Never you mind that there is currently “more office space available for lease in Manhattan than at any point in at least three decades.” That’s right, just weeks after the Governor and Mayor and several of Wall Street’s largest banks declared New York is back, we’re pretending that New York is going to need all of that new office space.
Admittedly and unsurprisingly, there are aspects of the Macy’s deal that are soothing to the transit oriented among us. Herald Square and West 34th Street generally are well served by the MTA so in principle it’s a good place to build. And like a good neighbor, Macy’s is massaging the City mothers and fathers by saying that as part of the deal they will invest in improving access to the subway by adding elevators and by making Herald Square & Broadway Plaza a car-free pedestrian-friendly urban space.
While I like the promised transit improvements, the post-pandemic timing of Macy’s announcement leaves me scratching my head. And I can’t help but think this play was co-written by the accused governor and Stephen Ross of the Related Companies. The plans sound a lot like Ross and Co.’s dream to increase density from Broadway west to his edifice complex at Hudson Yards.
The Macy’s project and Midtown West redevelopment fantasy generally looks like another case of New York real estate doing what it always does best — laying the groundwork for a future public bailout of a private bankruptcy. As is always the case, the public gets left picking up the check as in the case of the bloated construction costs for the 7 train extension to Hudson Yards. Sure, it’s nice to have the subway extension but it certainly didn’t need to be the gold plated edition that Ross got at the public’s expense.
The Macy’s announcement comes just a week after our self awareness challenged Governor sent up a trial balloon for his plan to build ten office towers around Penn Station to fund transit improvements at the perennially miserable rail hub. As if Cuomo’s now legal marijuana pipe dream could possibly pencil out in this post-covid world.
If there is any public money in the form of tax abatements in the Macy’s deal, New Yorkers should rise up and throw the outgoing mayor into the Hudson River. Scratch that, posthaste New Yorkers should throw both DeBlasio and Cuomo into the river. If they are having trouble swimming they can grab hold of the piles of the new Tappan Zee Bridge, named after a certain governor’s father.
Yours in transit,
Joel Epstein is a New Yorker and an advocate for public transit, livable cities and public space.
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