Retailers have been remerchandising their stores almost since the invention of the SKU. But reinvention to take them beyond just places where shoppers buy things and into homes, workspaces and even advertising mediums is a whole new strategy for some of the world’s leading retailing corporations. And this recent development comes on top of a decades-long process of repurposing former retail space into all kinds of other uses, from libraries to schools.
Coming out of the massive overbuilding of retail that occurred in the last decade of the 20th century and into the first years of the 21st century, the retailing industry found itself vastly overstored with too much space, particularly with the dawn of ecommerce and its market share grab. The Great Recession of 2008-2009, the Covid Pandemic years and all kinds of other twists and turns have exasperated the situation and that’s been the prime impetus for retailers and owners of retail space to look elsewhere to fill all those empty spaces.
Coming out of the massive overbuilding of retail that occurred in the last decade of the 20th century and into the first years of the 21st century, the retailing industry found itself vastly overstored with too much space, particularly with the dawn of ecommerce and its market share grab.
Some former retail spaces are seeing new life as distribution centers, sticking with the original purpose of transferring products from seller to buyer. But a whole new range of uses is emerging that have nothing to do with the traditional retailing model.
Work Now, Shop Later
We all know WeWork redefined the commercial office space model…even if their successes turned out to be not quite as robust as its founder led us to believe. But the basic concept of leasing space to individual users in a common setting has proved viable and the latest to jump on this concept is the Saks Fifth Avenue division of Hudson’s Bay Co. Last fall it launched SaksWorks, which takes its excess space in several locations – its Fifth Avenue flagship in Manhattan, downtown in the World Trade Center’s Brookfield Place center, in Greenwich, CT and soon in the Westchester Saks, just north of New York City – and offers it as short-term co-working office space. It includes amenities like restaurants and self-improvement programs with all the hipster vibe that seems to be a prerequisite to such arrangements.
SaksWorks is managed by WeWork – who’s shocked? – and space runs about $300 a month or $50 for a day-pass, according to a New York Times article. As work-from-home evolves, these kinds of working spaces may turn out to be long-term solutions for employees who are not returning to traditional spaces. Then again, they could prove to be a moment-in-time that have limited viability as conditions begin to normalize again.
Home Shop Home
If offices are the most obvious choice for retail-space-gone-bad, the more intriguing option is converting former stores into places to live. A number of companies, both in the U.S. and in Europe, are exploring this idea, the latest of which is the giant mall developer Unibail Rodamco Westfield. (The company announced it is putting its America-based Westfield unit up for sale but for the moment continues to operate malls on both sides of the Atlantic.)
Talking to analysts recently the company said it has applied for permits to build 1,700 homes adjacent to its Westfield Mall in London. The Wall Street Journal reported the company “has the potential to develop 16,000 residential units across Europe,” which would make it a major player in the housing market. Unibail is not the only retail player to look to the housing market for salvation. In Lynnwood, a suburb north of Seattle, a major portion of what was once the Alderwood Mall is being converted by its developer, Brookfield Properties, into a 300-unit residential complex under the Avalon Alderwood banner. Some 90,000-square-feet of retail space will be retained and as Bloomberg put it in reporting the news, “in a sense, the apartment complex will be the new anchor.”
Unibail is also looking at another option for its retail space: as a physical platform for advertising. Using digital screens located within its properties, the company sees the 550 million people who visit its malls as a captive audience for ads. It is reported to already have 1,700 digital screens that generated some $26 million in revenue and it wants to double that by 2024 according to published reports. It expects revenues from advertising and a secondary revenue stream, brand partnerships, to reach $200 million by the end of this decade.
Stores of Yore
All of this new activity comes against the backdrop of a long tradition of taking shuttered and/or abandoned retail space and using it for entirely different purposes. While it is something that has happened across the entire retail landscape, there are numerous examples of this in Manhattan.
- Arnold Constable: One of the legendary “ladies” department stores of the first half of the 20th century, the flagship on the corner of Fifth Avenue and 40th Street closed in 1976 and since then has been part of the New York Public Library system. In 2021 it was completely updated and modernized as the Stavros Niarchos Foundation Library.
- Altman: Another classic department a few blocks south on Fifth Avenue occupying the entire block between 34th and 35th Street, this imposing structure opened in 1906 and operated until the chain went out of business in 1989. Since then it has been part of the City University of New York with research facilities, meeting space and other academic functions.
- Ohrbach’s: It ostensibly was a department store but very different from its upscale neighbors, offering moderate priced merchandise from its main store on 34th Street opposite the Empire State Building. When it closed in 1987 it was converted to office space and for many years housed Fairchild Publications, publishers of Women’s Wear Daily, Footwear News and Home Furnishings Daily and home to Robin Lewis as well as this writer. It was then converted into wholesale showroom space and more recently has come full circle as a center-city distribution center for Amazon, at one time housing the company’s first Manhattan bookstore, now closed.
- Lord & Taylor: Yet another iconic retail nameplate, the store was bought by Hudson’s Bay Co. and after an attempt to reposition it back to its former status before May Co. ownership fit it into its infamous merchandising matrix, retail space was cut back and WeWork was set to move into the upper floors. As that company went through its own misfortunes, L&T was offloaded to new owners who couldn’t make a go of it and the entire retail operation was closed. Amazon was again the white knight, scooping up the 11-floor building to help satisfy what appears to be its insatiable appetite for office space.
- Bed Bath & Beyond: And in one more iconic twist on repurposing former retail space, BBB’s largest store, on Sixth Avenue and 18th Street lived a former existence as the Siegel Cooper department store that was once one of several large retail establishments along what was called at the time The Ladies Mile. The original store – of which Bed Bath only occupies one small portion – housed 15 acres of selling space and featured its own power plant, a large fountain on the main floor and even a velodrome where shoppers could test out the store’s ample bicycle offerings. Today it is once again retail space with several national chains besides BBB, one more example of the retail business constantly changing…and yet staying the same.
Reports of the demise of physical retailing have been circulating seemingly forever, amped up by a series of economic downturns and more recently by the rise of ecommerce. “Before the Great Recession we had too many retail spaces; now we have way too many retail spaces,” is how real estate consultant Randy White, CEO of White Hutchinson Leisure & Learning Group put it to Bloomberg recently. Yet, in finding new uses for old spaces, both retailers themselves and third-party developers seem to be finding ways to endure, even prosper.
Marketplaces where merchants sold their wares to shoppers go back to ancient times with the Grand Bazaar in Istanbul which first opened in the mid-1400s generally recognized as the oldest continuing operating retail space in the world.
Stores aren’t going away. But when some of them do, the possibilities are seemingly endless.