Would a skyscraper on top of Macy’s NYC flagship reach in the right direction?

Discussion
Rendering: FXCollective
Jun 04, 2021

Macy’s has been struggling to return to national prominence for some time, but CEO Jeff Gennette wants to focus on going big in the Big Apple. Mr. Gennette plans to transform the already large and iconic Herald Square Macy’s location into a massive retail landmark.

Mr. Gennette has committed to the building of a skyscraper atop the Herald Square Macy’s location as well as making an investment of $235 million into the area around the store,  according to Bloomberg.

Would a skyscraper on top of Macy’s NYC flagship reach in the right direction?
Rendering: FXCollective

The 1.5 million square foot skyscraper as conceived of in February, 2020, would consist of mostly office space and feature a “Sky Lobby” section where visitors could look out onto Midtown Manhattan, according to New York Yimby. Macy’s investments in the surrounding neighborhood would consist of upgrading the Herald Square subway station and improving access points, building new entrances into nearby Penn Station, adding in ADA-approved elevators and upgrading the adjacent public plaza. The retailer anticipates the investment generating $269 million in yearly tax revenue for the city upon completion.

The impact of the novel coronavirus pandemic on how people work and live in NYC, however, has some wondering if the move represents a potentially expensive misstep.

The New York Times reported last month that businesses in the Financial District and Midtown are experiencing significant downturns in foot traffic because the majority of workers now work from home rather than in these primarily business-centric areas. An accompanying drop in tourism has also hit businesses in those areas.

Questions also remain about how many employees will return to working in these areas as the U.S. opens up. Many companies are considering staying with full-time work from home or hybrid working models.

The challenge of office space viability given the post-pandemic circumstances is not lost on Mr. Gennette, who told Bloomberg he sees the move as a “long play.”

Macy’s experienced an uptick in same-store and online sales in the first quarter this year, which Mr. Gennette believes is more than just a short-term pop. He explained on an earnings call that he is confident in “accelerated profitable growth in 2021 and beyond.”

DISCUSSION QUESTIONS: What do you expect to be the result of Macy’s plan for its NYC Herald Square flagship and the surrounding neighborhood? Is this a wise investment on the part of Macy’s leadership or would it be better off directing these resources elsewhere?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Make the entire area a go-to place for New Yorkers. I think it is brilliant."
"The problem with Herald Square is that New Yorkers avoid it, much like Times Square. It’s a destination for tourists, much like Times Square."
"Hey, maybe in the near future, some New Yorkers who fled NYC will come home from their condos in Florida."

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22 Comments on "Would a skyscraper on top of Macy’s NYC flagship reach in the right direction?"


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Neil Saunders
BrainTrust

The area of Herald Square has long been in need of investment and any development by Macy’s will be welcome. If the location is upgraded and the store improved then I believe there will be benefits for Macy’s. However Macy’s needs to remember that as important as its flagship is, it has a lot of other stores and assets in its business and it needs to invest in and modernize those as well. I sometimes think Macy’s sees itself through the lens of its 34th Street shop which gives it a completely inaccurate and blinkered view of its brand.

Gene Detroyer
BrainTrust

There is no turning around Macy’s the retailer. It is just good money after bad. Focus on what you can build, not trying to save something that is unsalvageable.

Georganne Bender
BrainTrust

I would feel a lot better if those millions of dollars were invested in the hundreds of run down and neglected Macy’s stores across the U.S.

Cathy Hotka
BrainTrust

That’s the quote of the day, Georganne!

Georganne Bender
BrainTrust

Thanks, Cathy! It’s true though, the suburban stores need help.

Lee Peterson
BrainTrust

So it’s finally out in the open: Macy’s is actually a real estate company. The old school retailer and ex-NYC dweller in me shudders at the thought of a huge Franken-Building shooting out of the top of that classic landmark. I’d be a little more pleased if they (Macy’s Real Estate) just turned the top five floors into apartments but, then, what would happen to the lavish executive offices on the top floor? Oh my!

George Anderson
Staff

I too wondered why it didn’t offer residential units that could benefit the city and would more likely be filled than office space at this time. Macy’s could even offer apartments at a discount to workers in the building as a perk. Another option would be to reconfigure the building to bring in complementary retail businesses and other services that would attract customers on their own with space adjacencies to Macy’s store.

Gene Detroyer
BrainTrust

Real estate? Yes, if you subtract the real estate value from the Macy’s balance sheet, you end up with a negative net worth.

Liza Amlani
BrainTrust

Flagships must have a purpose. Macy’s plan for its NYC skyscraper will create jobs, improve the subway, and implement a much needed update to the surrounding areas. The purpose of the expansion is to support the local community and bring tourists back into the city.

My only question around this plan is, what will it actually do for Macy’s the retailer? It could increase foot traffic into the store but unless Macy’s starts to optimize its own assortment and improve its private label program to compete with the likes of Nordstrom, then we are not solving their retailing challenge.

Gene Detroyer
BrainTrust
Here is the caveat. Recent skyscrapers built in the city have been embarrassments to architecture. They are no more than sticks. Skyscrapers in other parts of the world have form and substance, even at over 100 floors tall. If it is going to be a stick, please don’t do it. That being said, I think the plan is creative, strategic, will give Macy’s a return and will add much to the city. Macy’s, the flagship store, is a tourist attraction. I have no idea how much of the pre-pandemic traffic was tourist, but it would not surprise me if it was well over 50 percent. So what do we have? We have real estate, worth more than the entire corporation. We have a brand name known around the world. Build on both as described in the plan. Make the flagship and surrounding area a bigger must see than it is now. Make the entire area a go-to place for New Yorkers. I think it is brilliant. This plan is the first real strategic thinking I… Read more »
Bob Amster
BrainTrust

And New York City needs another skyscraper why, again?

Mohamed Amer
BrainTrust

The skyscraper concept is a tremendous long-term play that makes sense, if and only if Macy’s is simultaneously able to invest in the core company activity of merchandising as it reinvents the department store into viability and relevance. Otherwise, the downward spiral will engulf the company as it entertains balance sheet acrobatics. Real estate will not save retailing but can help if the long-term strategy and investments target core and differentiating functions.

Richard Hernandez
BrainTrust

Wow – I don’t know if this is a wise use of monies. Macy’s stores are having an identity crisis. They are throwing concepts against the wall but not making any changes to the existing stores that really need the help. There are too many other choices in that level of retailing now. They need to find the differentiator to make customers want to shop their stores, but spending money on a flagship is not necessarily it.

Rich Kizer
BrainTrust

I actually think NYC needs this. There has been so much negative talk about how harsh of a city it is now, perhaps it is time to take a positive tack and hopefully invigorate the mood of NYC. We all know people are happy to be able to see retail coming alive, and I think it will happen to a degree because of this plan in NYC. Hey, maybe in the near future, some New Yorkers who fled NYC will come home from their condos in Florida.

Jeff Sward
BrainTrust

An idea that might have had merit pre-pandemic probably needs a deep dive reexamination post-pandemic. And even if that section of NYC sees some benefit from a new skyscraper and subway station, it doesn’t do anything to address Macy’s core issues. Skyscrapers don’t solve merchandising problems. I’m a former Macy’s guy and I am rooting for them wholeheartedly, but this sounds like a mismatch between problem and solution.

Ryan Mathews
BrainTrust

This sounds like a “Field of Nightmares” – build it and they will not come. Sure Herald Square could use a makeover, but so could most Macy’s stores. Sadly, this reinforces the observation that Macy’s is tone deaf to the real problems the chain faces. Appealing to tourists is great — if you are doing well I guess. But investing this much money in a trophy building rather than fixing your store is nothing more or less than retailing’s answer to fiddling while Rome burns. My vote? Two thumbs down.

Gene Detroyer
BrainTrust

Tone deaf, Ryan? I think for the first time in decades Macy’s management is realizing what is the best alternative for investing assets and getting a reasonable return. My imagination pictures Macy’s suburban stores with chains on the doors and boarded windows in 10 years, no matter how much they invest in cleaning up the stores and changing the merchandising. They are are the JCP trajectory. Let’s not invest good money into weak businesses.

Neil Schwartz
Guest

This is a great way for Macy’s to capitalize on what might be one of the most valuable pieces of real estate in the world. The question does remain, if they build it will people come? Right now, the issues at Hudson Yards with respect to retail traffic and activity has to concern developers.

Rachelle King
BrainTrust

The problem with Herald Square is that New Yorkers avoid it, much like Times Square. It’s a destination for tourist, much like Times Square. If Gennette would like to build a destination for tourists, then he’s on the right track. If he believes this will increase revenue in his flagship store or from real estate holdings then he might want to consider some alternatives, long or short game.

Sure, tourists will show up and look around, but office space is a gamble. New Yorkers that have to pass through the area will appreciate any upgrades to the subway and surrounding area but that will not make it a destination. The future is digital. There is significant opportunity for Macy’s in this space if Gennette would redirect his focus.

Craig Sundstrom
Guest

My expectation is this will be one of those “didn’t they once…?” footnotes people will hazily remember a decade from now (when Macy’s is either a 100 store chain, a division of Amazon, or just a memory).

I won’t spend time critiquing the idea, since that’s been done, nor will I spend any time praising it (since I can’t think of anything positive to say).

Keverne Denahan
Guest

Looks like I am in the minority here, but I say, go for it! Leaders need to take chances. And most them think slapping up more locations is a chance. It’s not. While the main goal is to improve Macy’s bottom line, he is doing it by enhancing the community that could use a bump. Closing under-performing stores across the country might be a good idea. I personally only shop at the Flagship in NYC. I have never experienced “the feeling” that I get in the NYC store in any other location nationally. None of them have ever had the Macy’s magic. It seems like he is trying to drive traffic to that area and get people talking. The people talking part has succeeded. LOL.

James Tenser
BrainTrust

I kinda like this plan for its potential impact on the Herald Square area of Manhattan. I’m less clear on how this will benefit Macy’s retail business. Maybe that won’t matter if the big department store model is approaching obsolescence. If the real estate portfolio is the true basis of company value, then this could be a coup for Macy’s.

The plans for the tower seem vague compared with the plans for the surrounding area. I’d venture that a mixed-use concept combing office, residential, and possibly hotel spaces might be more successful and resilient to future market variables than a pure office building.

wpDiscuz
Braintrust
"Make the entire area a go-to place for New Yorkers. I think it is brilliant."
"The problem with Herald Square is that New Yorkers avoid it, much like Times Square. It’s a destination for tourists, much like Times Square."
"Hey, maybe in the near future, some New Yorkers who fled NYC will come home from their condos in Florida."

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