BRAND PALACE BATTLE:

Are Apple and Nike Fighting Over The Old FAO Schwarz Space?

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Most recent reports are telling us that this year has brought tough times for retail real estate with shopping falling short of projections for the past couple of seasons, but in Manhattan, the right space is still in demand.
Take the now long-empty Fifth Avenue space in the GM Building vacated by FAO Schwarz last year (pictured above). for several months now, we have all been under the impression that Apple will temporarily take over the space while it renovates its 24-hour flagship store underneath the building's plaza, but now we are told that the tech company is now looking to add all or part of the above-ground store as permanent space. This comes on the heels of reports that had Nike negotiating for the space, but it has also been reported that the sneaker icon has renewed its Niketown lease on East 57th Street through 2022. While they may still be interested in the GM building space, ultimately, the building's owner, Boston Properties, will have to decide if it is worth it to keep the space empty for Nike for a few more years, or to make a deal with Apple which is said to be balking at the $2,700 to $4,450 per square foot asking rent for the space and feels it deserves a break since it has drawn such attention and prestige to the location with its store. Will Apple need all 61,000 square feet in addition to its underground space. How will they differentiate merchandise for two side-by-side stores? Will there be an underground passageway to connect the two separate spaces, or will some other mega-brand swoop in to take over the still-prestigious retail space out from under both Apple and Nike's noses?
We should know these answers soon —or maybe not. Essentially, we will hear it when we hear it.

Apple likely to expand at GM Building on “temp” basis (TheRealDeal)


PLANNING AHEAD:

Nordstrom Already Expanding The New York Flagship It Hasn't Opened Yet

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You would think that 285,000 square feet over seven floors in a brand new, specially built skyscraper would be enough room for Nordstrom to launch it's long awaited Manhattan flagship, but the folks at the home office in Seattle are apparently feeling a little bit less confident about having enough space, now, so they have expanded —across the street.
WWD tells us that Nordstrom has taken a three level 43,000 square foot space at 3 Columbus Circle (pictured above) just across Broadway from the upcoming Nordstrom Tower for a second store. Rumors about the chain's interest in the space popped up about three months ago, but speculation was that it was to maximize the brand's presence with a flagship Nordstrom Rack store. If it seemed a bit unlikely that they would place an outlet unit so close to what is expected to be one of its crown jewel flagships, that's because it was. In fact the space will be an extension of the flagship as the home for certain departments relocated to make more room in the main store. While those departments have not yet been identified, speculation centers around shoes or menswear. While Nordstrom is known for its massive shoe departments, it is hard to imagine that it would move them across the street into a different building, making it difficult for sales staff to easily cross-sell footwear to complete apparel purchases. A men's department, however, can be and has been easily encapsulated in a separate, multi-level building as shown by Bergdorf Goodman's 25-year-old Men's store across Fifth Avenue from its original store and the freestanding men's store Saks Fifth Avenue is planning in the Financial District to complement the branch opening at Brookfield Place later this year. Nordstrom is also known for having one of the strongest men's businesses in the industry which could be maximized in New York City with its own storefront.
Or perhaps they haven't even decided yet. The additional space had included a Bank of America branch which the building's owner bought out to make the deal, and, since it is part of a building that is already built, unlike the very much under construction flagship store, Nordstrom has plenty of time to decide what to do with the space as well as create the store inside. Look for an announcement confirming the new space's use. . . eventually.

Nordstrom Lands Second Manhattan Location (WWD)


SNEAKER CENTRAL:

Adidas Finds A Fifth Avenue Spot For Its North American Flagship

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Though it appears to have converted the entire city to Stan Smith and Superstar devotees in the past year, sneaker giant Adidas has been playing a catch-up game on the retail front in New York City. Since Niketown landed on East 57th Street, its arch-rival has been carefully colonizing the city with a more exclusive Sportswear store, an even more exclusive appointment only Fitness studio and Nike Running stores around the city, along with various pop-ups when appropriate. Adidas, however has contented itself with an Originals store on Wooster Street (soon to move to new digs on Spring Street) and a brand flagship not far away at Broadway and Houston Street. Things will change, however, in about a year when, according to the Observer, the brand finally ventures north to Midtown to unveil a 34,000 square foot North American Flagship store on the corner of Fifth Avenue and 46th Street. Once an HMV superstore (remember those?), and most recently a Build-a-Bear Workshop, the store will be twice the size of the current Broadway store across three floors, but more importantly, it will be better positioned to capture all that precious tourist traffic. It is projected to open in late 2016, by which time, the once moribund stretch of Fifth Avenue between 42nd and 49th Street will be even further along in its ongoing upgrade from second string location to a Varsity-level retail mix.

Adidas Nabs 34K-SF East Midtown Space for New North American Flagship (Commercial Observer)


FIFTH AVENUE FLIP:

Victoria's Secret Will Put A Flagship Where Forever 21 Skipped Out

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The rumors around 640 Fifth Avenue have been swirling for a while. At one point, it was firmly  believed that Niketown would move in after H&M vacated the home of its first U.S. store and its Trump Tower lease on East 57th Street ran out, but we discovered last January that trend driven teen budget chain Forever 21 was to be the next tenant.
Until a few weeks ago.
We aren't sure if it was never meant to be a permanent store but Forever 21 beat a swift retreat from pricey Fifth Avenue last month, leaving a major retail space up for grabs, until lingerie mega-chain Victoria's Secret stepped in to take over the 63,780 square foot store. They won't be hawking bras and panties an the corner of 51st and Fifth right away. The new store is not expected to open until November of 2016, which will give the company plenty of time to transform the space and presumably festoon a remodeled interior in its signature shades of pink.

Victoria’s Secret opening flagship at Vornado’s 640 Fifth (The Real Deal)


RENOVATION ANTICIPATION:

Saks Fifth Avenue Announces Its Latest Flagship Makeover Plan

SFAflagshipAt this point, several announcements about major renovations for the enormous Saks Fifth Avenue flagship store have come and gone with little actual activity, often because top management has changed faster than they have been able to implement the ever more elaborate and expensive renewal projects. The most recent one came earlier this year when then president Marigay McKee presented plans which included a series of bi-level designer lifestyle boutiques that would ring the main floor and extend up to the second level creating what we could only imagine to be a construction nightmare that wouldn't actually solve the store's pressing merchandising problems. McKee's noisy but brief tenure as Saks president ended shortly after that announcement, and the plans were apparently scuttled.
Today, WWD reports that current Saks President Mark Metrick has announced a new 3-year $250 million renovation plan that is even more radical, shuffling floors and adding a lower concourse level and even a dramatic new elevator. Ordinarily we would simply sigh and say, "We'll believe it when we see it," but now that Saks appears to have settled more comfortably as a division of Canada's Hudson's Bay Company, we have a feeling that this plan, or at least parts of it, will stick. Here are some of the main points of what will ultimately be a startling shakeup of every floor in the store.

Handbags and Accessories will take over the entire main floor.
One of Saks' longtime merchandising struggles on Fifth Avenue has been an epic fight for space on the main floor of the original building between cosmetics and handbags. Despite the enormous amount of floor space, there has never been enough room for retail's two most profitable categories to coexist peacefully there along with jewelry, and it would appear that cosmetics has won, taking over almost all of the floor space, and pushing accessories to a series of in-store shops around the store's perimeter and an undersized multi-brand handbag section crammed into the escalator atrium. This forced handbag customers to not only shop in a cumbersome ring around the huge main floor, but also to have to contend with aggressive makeup reps while buying purses.
In a reversal, Accessories have now gained the upper hand, and will not only take over the front of the main floor, but also the Swiss Tower sections behind the escalators currently occupied by jewelry. That department will be divided between the new concourse level downstairs to be called "The Vault" for precious gems and watches and part of the tower section of the second floor which presumably will house semiprecious baubles. It's a big change that will not only make it easier to sell those high-margin accessories, but should also mollify some important luxury brands without their own in-store shops who could not have been happy with the puny accessory area around the escalator atrium. This means that...

Cosmetics will move to the second floor.
Competitors Bergdorf's and Barneys have previously solved space problems by creating expansive makeup deportments in luxuriously renovated basements, but Saks will twist that scheme by moving it upstairs instead for 53% more space. The second floor at Saks is currently dedicated to more separates-oriented women's designer collections (they used to call it Designer Sportswear), but the section in the front of the store hasn't seen a major renovation since the 1970s, which is when the dramatic wooden superstructure you see there now was installed. Presumably, it will finally be cleared out. How will Saks keep what must be one of the biggest cosmetics departments in the world humming without the main floor foot traffic? A new glass elevator with a 23-foot staircase spiraling around it as well as an additional escalator will be installed in the center of the main floor to ferry customers up to two and down to the new jewelry concourse. Having cosmetics on two will trade the main floor's hectic —and extremely loud— ambiance for a more relaxing environment that will encourage customers to buy more. It will also save store visitors from having to brave battalions of fragrance models on their way to the upper floors, which is a win for everybody

Women's apparel will shrink from four to three floors.
With cosmetics moving up, women's wear will lose an entire floor, but the entire women's departments are being re-imagined. No longer to be stratified by price between the second and fifth floors, women's departments will now be arranged by lifestyle, with varying price points and different designer collections on every floor between 3 and 5. In addition, a new department call "The Ballroom" will be created on the 9th floor devoted only to eveningwear including shoes, handbags and jewelry. Bridal will also be included on the floor as well.

While Men's will remain on 6 and 7, it too will be rearranged with more of a lifestyle point of view, and other departments will be tweaked and moved around. The plan is one of the most elaborate store renovation plans we have seen, but, assuming it is fully carried out, it will give Saks some long overdue changes and updates. Don't get too anxious to see the results, however. It is not projected to be completed until 2018. In the meantime, there will be much construction disrupting the store, but when it is finished, it should result in a state-of-the-art ready to do battle just as fierce competitor Nordstrom sails into town.

Master Plan for the Saks Flagship Breaks Convention (WWD)


FLAGSHIP FLASH:

COS To Open On Fifth Avenue In Former 42nd Street H&M

COSlookbookWhen H&M's sizable store at 42nd Street and Fifth Avenue quietly closed several months ago, the speculation began as the Swedish chain maintained the lease and sources suggested that it would be converted to a new format.
Would it be COS or & Other Stories? One of the two H&M owned chains that debuted in SoHo a year or so ago was bound to be replicated uptown, and now it looks like COS will definitely be opening in the space sometime before the end of 2015.
And maybe the other one too?
The catch is that COS will only be taking 3,982 square feet of selling space, a fraction of the size of the former 2-level H&M store. Even with extra space for stock and back offices, that leaves plenty of room for another store, suggesting that & Other Stories could still expand uptown and take up residence next to its more elegant sibling, unless the rest of the space was subleased out which is another possibility.
In any event, New York shoppers will likely be thrilled to find another COS location. Even though 42nd Street and Fifth Avenue is heavy tourist company, COS has been a huge hit in the city, and the SoHo store is regularly packed with customers snapping up the brand's sophisticated yet well-priced collections. The upcoming store is part of a major expansion for the still relatively young chain. COS announced a major global expansion yesterday that included 5 more North American stores in addition to the Fifth Avenue unit. Look for the COS craze to only get bigger as the Fifth Avenue countdown begins.

Note: we originally misquoted the square footage of the upcoming COS store as 3,357 square feet. It has now been confirmed to us as 3,982 square feet.


FLAGSHIP FLASH:

Gap & Old Navy Will Take Over
Toys 'R' Us In Times Square

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The question of whether any one store would be big enough to take over the Toys 'R' Us flagship in Times Square has been answered with a "No," as Gap Inc. made a deal last week to take over only half of the space for two flagship sized stores. The Observer reports that both the Gap and Old Navy chains will build flagships inside the space after Toys 'R' Us vacates it next year, and the arrangement will include building a third floor atop the structure.
Gap will take 6,000 square feet on the ground level with 25,000 below for a mostly underground store. Old Navy, the division of Gap Inc. which is really driving profits at the moment, will have the more visible part of the complex with the other 6,000 square feet on the main floor as well as the entire 17,500 square feet on the second floor plus another 17,000 square feet on the third floor yet to be built. This marks Old Navy's Times Square debut. It has a store on the busy 34th Street corridor, but just closed its high-profile SoHo store which is being turned into a Zara flagship. Presumably, this means that Gap will eventually close its large Times Square store at 42nd Street and Broadway, but considering how long it will take to build another floor on top of its future home, the move will probably still be at least a year off or more. More details likely to come, so stay tuned.

Gap and Old Navy Find Side-by-Side Homes in Times Square (Commercial Observer)


REAL ESTATE RUNAROUND:

Diesel's Midtown Plans Seem To Include Staying On Fifth Avenue

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Last week, news of Diesel's freshly signed retail lease at 625 Madison Avenue coupled with the closure of its Fifth Avenue flagship led many of us to assume that the denim giant was ditching the city's most desirable retail address for an only slightly less desirable one on Madison Avenue. Well, a stroll up Fifth earlier today revealed that while the Diesel flagship is indeed closed and under plywood, it appears to be undergoing an extensive renovation. Again, it is surprising to see such a dramatic alteration after only six years, but less so that abandoning the space altogether after such a short time. Signage (above) clearly states that the store is under construction, but still one of Diesel's.
As for 625 Madison Avenue (below), the reported 4,400 square feet seemed a little bit cramped to fit a flagship, which leads us to another speculation: that the new space might be devoted to the brand's upscale collection, Diesel Black Gold, which currently has a location in SoHo. While it has been around for a while, the Black Gold line has gained some real traction in the past few seasons now that creative direction has been assumed by Andreas Melbostad formerly of the late and much lamented PHI. A Madison Avenue location would be much more appropriate for the more exclusive runway collection, and the whole arrangement generally makes a lot more sense. As with all unconfirmed speculation, the store could be for something else entirely (childrens?) or for another brand owned by Diesel owner Renzo Rosso's Only The Brave holding company, but our money's on Black Gold, for now.

Previously:
Flagship Flash: Diesel Flagship Trading Fifth Avenue For Home On Madison
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FLAGSHIP FLASH:

Forever 21 Fifth Avenue Opens Tomorrow With Little Change From Previous Tenant

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Though the doors are actually open right now, Forever 21's new Fifth Avenue flagship officially opens tomorrow. Today's visitors will discover a store that is not quite ready with the top floor still closed to customers and plenty of frantic staffers buzzing about making placing merchandise and making other arrangements for tomorrow's opening. The will also see all the changes that the chain has made to the space from it's previous tenant H&M, which are basically none.
Aside from a coat of paint, the space is still indistinguishable from when it was Forever 21's fast fashion rival, right down to the men's section on the second floor. You might not even notice that the store changed at all from the outside. The reported five floors were obviously something of an exaggeration unless there is some hidden construction happening on the floors above. The layout is basically unchanged. It's not terribly surprising. The home of impossibly cheap trendy sportswear is not known for its extravagances. After all, they have to maintain those slender margins.
Even so, the chain will throw a party tomorrow morning  to fête its prestigious new address tomorrow morning with a giveaways, hot chocolate, snacks, gift cards and tote bags for the first 500 people to line up in front of the store after 7:30 AM. At 9 AM, Pop Sensation Cody Simpson will cut the ribbon and perform no more or less than three songs at 9:45 for what is fairly likely to be an audience of screaming teenagers.
Proceed with caution.
After the showbiz excitement has faded, there will be a nail spa, photo booth, "festive" food and screen printing of limited edition tote bags for those F21 fans who must be there on the very first day.

Previously:
Speculation Surprise: H&M's Former Fifth Avenue Flagship Going To Forever 21 —Not Nike


FLAGSHIP FLASH:

Diesel Flagship Trading Fifth Avenue For Home On Madison

Diesel5thAveAs one big Fifth Avenue spot gets filled, another one looks like it will be opening up so. Diesel has reportedly signed a deal to take over 4,400 square feet of space including the Baccarat store at 625 Madison Avenue across from the rear side of the GM building. The new store's neighbors will include Fratelli Rosetti, Stuart Weitzman and Philipp Plein.
Presumably, that means that the Italian denim brand will be abandoning the Fifth Avenue flagship it opened only six years ago in the former longtime home of Gucci (pictured left). Since most retail leases these days start at about 10 years, we can only speculate as to why a, presumably healthy, major international brand like Diesel would abandon a lavish, high profile store right in the middle of Fifth Avenue's tourist-rich sweet spot before its lease is up? Have rents on Fifth inflated so much in the past couple of years that Diesel's landlord was willing to buy them out in order to make way for a new tenant willing to pay even more? At $1,400 a square foot, Diesel's rent on Madison for a 10 year lease is reportedly an 83% increase over what Baccarat paid.
We know, it's insane, but it still might be less than what Fifth Avenue demands.
The other question is why Diesel would move to Madison at all?
While Fifth has become a peculiar free-for-all mix between longtime pure luxury players like Bergdorf Goodman, Tiffany and Cartier, newer brand palaces like Prada, Dolce & Gabbana and Armani and mass market mega-flagships like Gap, H&M, Uniqlo and soon, Forever 21, Madison has remained an enclave of almost exclusively the highest-end boutiques and jewelers. Some luxury brands like Amani, Bottega Veneta, Valentino and Prada maintain a presence on both streets to show off for tourists on Fifth and serve more exclusive, crowd averse clients on Madison. Diesel, as upscale as it may be, doesn't really fit that mold. There must have been some reason why the jeans giant was compelled to leave what would seem to be the perfect spot for one that is good, but maybe not quite as good. Maybe 625 Madison offers a more favorable selling space, or perhaps it was just financially more viable? We may never know for sure, but we can count on the new store to be something of an update for the brand. We have no opening date yet, but expect it to reflect Diesel's retail evolution under its recently installed creative director, Nicola Formichetti. Stay tuned.

SL Green Secures Dramatic Rent Increase in Diesel Deal (Commercial Observer)