Times Square Shopping Searches For Its Groove Post-Pandemic

COVID emptied storefronts and sunk foot traffic so much that the retail character of the Crossroads of the World shifted yet again

reprints


Times Square was so empty in 2020 you could walk across Broadway blindfolded. And some did.

“The pandemic comes. The city is desolate. Times Square is like a sci-fi movie,” Nevin Danziger, a broker with the Torkian Group, said. “I walked across [Broadway at 51st Street] with my eyes closed once.”

SEE ALSO: Sunday Summary: Retail of the Tape

In March 2020, the world stopped, and so did its crossroads. Today, though, the iconic shopping destination is bustling compared to those mid-pandemic days. Shoppers lug bags across Broadway. Tourists line up at the red TKTS booth seeking discounted tickets. Crowds gather as men do flips in front of One Times Square, the site of the New Year’s Eve ball drop. 

But lingering impacts from the pandemic remain on the crop of retailers that make up the thoroughfare. A handful of higher-end shops ditched the district during the pandemic while several fast-food chains moved in — and while that trend could continue, it doesn’t necessarily spell disaster for Times Square so long as it keeps the tourists happy. Like most of New York, the Crossroads of the World has always had a little bit of everything — and a complicated history.

Times Square was once the “horse center of New York City,” dubbed Longacre Square after London’s horse carriage district. Loose horses roamed the streets, not actors in Elmo and Mickey Mouse costumes. Residents traded buggies for cars, theaters moved in, the Great Depression hit, and, by the 1960s and ’70s, adult businesses, peep shows and prostitution thrived in Times Square, leading Rolling Stone to dub West 42nd Street the “sleaziest block in America.”

Today, adult video stores like Show World Center, once called the “McDonald’s of sex,” have been replaced by actual McDonald’s. Kids horse around on skateboards near the U.S. Army recruitment office on West 43rd Street. Tourists amble past the Hard Rock Cafe, a boozy Taco Bell Cantina, American Eagle, Forever 21, Gap and hundreds of other retailers that shine under Times Square’s glaring neon signs.

Still, some storefronts sit noticeably empty. Covergirl’s four-story, 10,040-square foot outpost is up for grabs, according to a bright blue sign wrapped around the first floor. (The retailer looked to sublease the 30 Times Square flagship store in 2020.) Ray-Ban and Oakley ditched their Times Square stores at 1515 Broadway between August 2021 and 2022, according to Google photos of the locations. Even McDonald’s closed its four-story flagship on West 42nd Street in 2020, though the decision was reportedly not related to the pandemic, according to the New York Post.

Times Square’s fortunes have certainly ebbed, at least when it comes to the area’s asking rents. The average ground-floor retail asking rent in Times Square peaked at $2,413 per square foot at the start of 2013. It then fell 47 percent to $1,274 per square foot in the fourth quarter of 2022, according to CBRE data from 2011 through 2022.

At the same time, availability is down. Times Square had seven available retail spaces in the fourth quarter of 2022 compared to a peak of 12 available storefronts in the second quarter of 2021, according to CBRE data. And national food chains have been pouring in.

Fried chicken makers Raising Cane’s, Popeyes and Filipino fast food spot Jollibee have inked deals for new Times Square outposts, alongside smaller brands like Los Angeles-born Mexican joint Pink Taco, candy shop IT’SUGAR and celebrity cake-maker Carlo’s Bakery. Even discount retailer Five Below took 10,000 square feet at 233-267 West 42nd Street in February.

The shift in Times Square’s retailers is, for lack of a better phrase, a sign of the times. Times Square is a natural fit for these tenants because publicly traded, national brands benefit more from the area’s huge crowd of potential customers and brand awareness, said Colleen Baum, a partner at McKinsey who leads the firm’s North American retail real estate practice. 

“Times Square is a great location in the sense that you get a lot of not only tourist traffic but it’s very close to the heart of the city for analysts and investors to visit,” Baum said. “A lot of the real estate within Times Square is going to be more experiential in nature. It’s going to have the best inventory and have the best product, so in a lot of ways it is the best expression of what a retailer is hoping to accomplish within the four walls of a store.”

Even with Times Square’s strong appeal to tourists, the sluggish return of office workers to Midtown makes the area less important for digitally focused brands, Baum said. Retailers that got started online and focus less on brick-and-mortar stores might want a New York flagship in a more residential area, to benefit from shoppers that live there.

“In my own perspective, it’s a little bit less valuable,” Baum said. “I actually expect that rents will not increase quite as much in the Times Square area relative to the rest of the city. I think that comes back to a little less working from the office.” 

Still, a new crop of office tenants has flocked to Times Square because of its enviable status as a transportation hub. Jewelry company Pandora put a ring on 27,936 square feet of office space at 1540 Broadway in December, french liquor sellers Rémy Cointreau inked a deal to move to 29,852 square feet at 3 Times Square, and Touro University, which landed a 32-year lease for 243,000 square feet at 3 Times Square in January, tacked on another 66,438 square feet in March.

William Rudin, the chairman and CEO of Rudin Management, 3 Times Square’s owner, believes Times Square is well on its way to a full pandemic recovery.

“We are very optimistic in Times Square,” Rudin said. “We have had very strong touring in the building because of the leasing momentum that we’ve done. We are showing to a significant amount of different types of tenants. … We’re pretty close to levels of pedestrian traffic on Broadway, [there’s] new restaurants.”

And, while retail asking rents have slipped in Times Square, that’s not so different from Manhattan’s overall reality. Average retail asking rents on the island peaked in 2013 and 2014 and declined steadily into 2020, before picking up slightly in 2022, according to CBRE data. Today’s retail asking rents are actually much healthier for Times Square, CBRE broker Matthew Chmielecki said.  

“When rents were at their peak, I think there was a lot of crossing your fingers and hoping this is a successful move because these numbers were just not sustainable,” Chmielecki said. “I think collectively, nobody wants to throw a wrench in that wheel and start jacking rents. Because we learn from our mistakes — rents were too high for a long period of time.”

Tourism has also crept up in the district. On an average February day, 243,000 people visited Times Square, compared to 205,000 people in February 2022 and 89,000 people in February 2021, according to data from business booster group the Times Square Alliance. This year’s February visitor count remains about 21 percent below the same month in 2019, but spending is catching up fast.

Domestic visitor spending increased above pre-pandemic levels in the fourth quarter of 2022 at $304 million compared with the $301 million that same group spent in 2019, according to the Alliance. While international visitors haven’t quite returned to pre-pandemic levels, spending in the fourth quarter of 2022 reached $160 million, just 9 percent below 2019 spending of $176 million.

And, when it comes to hotels and restaurants, international tourists are dropping more cash than they did before the pandemic, according to the Alliance. Visitors from abroad spent $58 million on hotels in the fourth quarter of 2022 compared to $52 million in the same period in 2019. In Times Square’s restaurants, international tourists spent $49 million in the fourth quarter of 2022 compared to the $45 million they spent in the fourth quarter of 2019.

The return of tourists is a good sign for Times Square’s ongoing projects, like L&L Holding’s TSX Broadway — a $2.5 billion-plus hotel and retail development at West 46th Street and Broadway. The hotel will wrap construction in the third quarter of this year with the retail, including an indoor-outdoor performance space, finishing up next year, said David Orowitz, principal and managing director at L&L Holding.

“It’s actually pretty amazing that there’s that many tourists and shoppers and others that have come back to the city,” Orowitz said. “We’re really confident that people really are already back and there’s intrinsic demand for international tourism, so that further comes back.”

L&L will bring the hotel online after a tough time for the city’s hospitality industry, though several formerly shuttered hotels have reopened. The Hilton New York on West 42nd Street reopened last year after a two-year closure and sale. The Crowne Plaza, also in the Times Square area, is accepting reservations, even though its owners filed for bankruptcy in December, according to its website. 

And the Times Square Edition Hotel, from Marriott International, is open for business, despite the fact that the $900 million commercial mortgage-backed securities loan on its building at 20 Times Square hit special servicing at the end of last year. (The property was briefly home to a Marriott-branded hotel that closed for good during the pandemic.) 

When L&L’s 661-room hotel opens next year, Orowitz is confident the market will be ready for it.

“The fact that some of the supply in Times Square isn’t there anymore is not a negative thing from the perspective of supply and demand in the square,” Orowitz said. “Hotels have evolved over time, and some of the older offerings weren’t relevant to what the demand is from the customers today.”

Another handful of developers might be taking a gamble on a new project at the Crossroads of the World. SL Green Realty and Caesars Entertainment proposed redeveloping 1515 Broadway into a casino, after SL Green’s original partner, Hard Rock, ditched the plan to focus on a development in Citi Field in Queens. Jay-Z’s Roc Nation also hopped on the joint venture, and more than 20 business leaders and labor unions have thrown their support behind the casino proposal.

SL Green, Caesars and Roc Nation have sweetened the deal by offering security and transit improvements in their proposal, and believe the investment will help revitalize the tourism industry, Commercial Observer reported. 

To Tom Harris, president of the Times Square Alliance, a casino bid is just more proof of how valuable Times Square real estate is. (The Alliance won’t take a formal position on the casino project, and is willing to work with anyone looking to do business in Times Square, Harris added.)

“I think Times Square is doing well, and that’s why Jay-Z wants to be a part of Times Square and both the casino project and the TSX project,” Harris said. “I think that that’s why SL Green wants to bring a casino to Time Square, because they see the value, they see the possibility in the future of Time Square as being the heartbeat of New York City. And they want to be here because it’s good for them.”

Celia Young can be reached at cyoung@commercialobserver.com