FLAGSHIP FLUX: Toys R Us To Abandon Its Immense Times Square Flagship

What does it mean when big box megastores can no longer afford the rent?
Yesterday, The Observer reported that Toys R Us would not be renewing the lease for its huge, 110,000 square foot, three level Times Square flagship which begs the question: Where's that ferris wheel going to go?
Probably a block or so away. Rumors have the retailer moving to a smaller, but still sizable space at the base of the Marriott Marquis hotel, though a spokesperson for the company refused to confirm any future locations.
Don't look for another lavish showplace to replace the tourist toy palace though. The combined rent for the space currently rates at a whopping $2,500 per square foot for the ground floor portion of the space, $350 on the upper level and $150 on the lower level, and it is unlikely that another retailer which would even be eligible for such a space would operate there profitably. Look for the space to be split up into smaller parcels, and that means that after Toys R Us exits in 2016, there will be an extremely long renovation and gutting process, so don't expect anyone else to be open in that space at 44th and Broadway for quite some time. As for Toy R Us, if they don't find another space to relocate to, that would leave Manhattan with no large toy retailers at all, as the Toys R US-owned FAO Schwarz is also expected to leave its pricey GM Building home on Fifth Avenue, possibly for a mega-mall in New Jersey. While there is a smattering of smaller, independent toy stores scattered through the borough, as well as a much smaller Toys r Us "Express" shop in the Manhattan Mall, anyone with their own kids —or just kids in their lives who periodically need presents— knows that a large toy discounter with the wide selection of Toys R Us is an indispensable resource. While the store is certainly a major tourist draw, it is also an important place for locals to shop, mainly because it is the only store of its kind in Manhattan. Competitors have been clobbered by both Amazon and Walmart, leaving the veteran chain in the position of the last one standing. The question is where? As retail rents on desirable shopping streets continue to rise to unprecedented labels, one has to wonder when the deep pocketed retailers who have fostered these rent increases draw the line and say no. Toys R Us seems to have hits its limit for such an expense. Who will be the next big chain to tell landlords that rents have gotten out of hand?

Toys R Us Leaving Flagship Times Square Location (NY Observer/Commercial Observer)