Starbucks to Close Teavana Tea Bars in New York City

“The company has made the decision to convert three tea bar locations in New York to full Starbucks stores and close the Beverly Hills location, which is adjacent to a Starbucks store,” according to the news release. “Teavana’s University Village store in Seattle, Wash. will continue to operate and bring innovation to the tea category and to Starbucks beverage pipeline.”

As for the reason for the closures, the company said: “These changes to the Teavana specialty retail portfolio of more than 350 stores will allow the company to focus on new product innovation and elevating the Teavana tea experience through its Starbucks stores, reaching more customers with its expansive store footprint. Additionally, Teavana will focus on evolving a customized tea experience throughout specialty retail by bringing exotic blends, great flavors, wellness and innovation to customers globally.”

The Teavana retail shops at 2261 Broadway at the corner of West 81st Street and 1291 Lexington Avenue close to East 87th Street won’t be affected.

In October 2013, Starbucks launched the first tea bar in 1,700 square feet at 1142 Madison Avenue near East 85th Street, also known as 30 East 85th Street, as Commercial Observer previously reported. Joshua Roth, who handles leasing for Manhattan Skyline Management, which developed the condominium, declined to comment.

Teavana, which last Monday introduced seven new loose-leaf wellness teas, opened in 1,954 square feet at the bottom of 1073-1077 Third Avenue near East 63rd Street in the summer of 2014, as CO previously reported. Cushman & Wakefield’s Jason Greenstone and Alisa Amsterdam represented the landlord, 205 East 63rd Street Corp., in the transaction.

SCG Retail’s David Firestein and Taryn Brandes, Starbucks’ brokers in New York City, represented Teavana. At the time of the Third Avenue deal, Mr. Fierstein said of the tea café concept: “We’re continuing to do more of these in the city and around the country.”

At 771 Broadway, a Teavana bar occupies 3,000 square feet at the base of The Randal House, which also has an address of 63-67 Ninth Street, according to CoStar Group. The 10-year lease commenced Oct. 1, 2014, CoStar Group indicates. Rose Associates manages the co-op, and a company spokesman didn’t respond to a request for comment.

A slew of retail specialists said the news was not surprising considering that people rely on coffee far more than they do tea, and the steeped beverage is ubiquitous.

Teavana’s cafés have failed, retail broker James Famularo, a senior director at Eastern Consolidated, said, “because tea is too widely available [and] you can literally buy it anywhere.” He has not been involved in any of the Teavana leases.

The company, which was founded in 1997 and went public in July 2011, is primarily a mall-based retailer and its teas are also sold at Starbucks. But Starbucks launched the bar concept at 1142 Madison Avenue after acquiring the now 350-store tea company the year prior for about $620 million in cash.

“I don’t think that the Teavana cafés have failed as such but that Starbucks has another concept they are thinking about expanding and these are all great locations that can lend itself to that as well,” emailed Faith Hope Consolo, the chairman of the retail group at Douglas Elliman. “The other direction is that some of these locations/leases may not make sense on their own as some of the Teavana cafés have become part of the overall concept of Starbucks.”

She said the other “concept” was “incorporating a wine bar to generate more evening business, as they have in Seattle. They also have the other concept store in Wall Street featuring the Starbucks Reserve Roastery & Tasting Room.”

Messrs. Roth, Greenstone and Firestein didn’t respond to requests for comment.

It’s not just New York City in which the Teavana bars are closing.

Teavana suddenly shut down one of its two Chicago cafés in September 2015, less than two years after opening, according to DNAinfo. It was the first that the company opened in the Midwest.

“As part of the normal course of business, we’re always evaluating the stores’ portfolio, and we decided to close the Southport tea bar,” a Teavana spokeswoman told DNAinfo.

But Teavana sales are strong within Starbucks stores.

“This past fiscal year, Teavana-branded handcrafted tea beverages generated nearly $1 billion in sales through Starbucks stores in the U.S., up 12 percent over the previous year,” today’s press release indicates. “And tea, once again, added a point to comp in [first-quarter fiscal year 2016], continuing the growth momentum of the past few years. The tea category in Starbucks stores is growing double-digits across the U.S. and Canada store portfolio, with Starbucks well on its way to building the Teavana business to over $3 [billion] over the next five years.”

Tea brands across the board seem to be feeling the pinch.

“I think tea is a difficult category in this country,” said Peter Braus, a managing principal at Lee & Associates NYC, who has negotiated deals with Starbucks. “Every time a tea chain has been tried, it’s failed. Americans are addicted to coffee. Many, like me, drink Starbucks every day, and sometime multiple times a day. I think the per capita consumption of tea just isn’t and will never be as high.”

Mr. Braus pointed to Argo Tea Café’s recent downsizing of its store at 75 University Place on the corner of East 11th Street to about 1,000 square feet from roughly 2,000. (A spokeswoman for Argo didn’t immediately return a request for comment.)

“It’s really a question of how much sales per square foot can be generated and whether or not these cafés can support the rents for Madison Avenue, Third [Avenue] and Broadway, which apparently these locations cannot,” said John Brod, a partner at ABS Partners Real Estate. “There are so many factors now affecting retail, in addition to increased rents, and with retailers looking deeper into their performance matrixes we will see more closures like these.”

Retailers that could be vulnerable to such closures include Jamba Juice, Organic Avenue, Hollister, Clarke’s Standard, Macy’s and Walmart, Mr. Brod said.

Retail pro Andrew Mandell, a managing partner at Ripco Real Estate, said it boils down to the fact that it’s still a coffee country.

“People are still addicted to coffee,” Mr. Mandell said. “Tea is very slowly catching on.”