As the city that never sleeps has been asleep for the past three months, its typical beating heart of tourism, Times Square, has become quiet.
Most of the display windows along 42nd Street, Broadway and Seventh Avenue have closed their doors. The empty streets of “The Bowtie” are in stark contrast to the burgeoning experiential retail hub it was just a few months ago.
Last year, about 380,000 pedestrians entered Times Square on an average day. Since the pandemic hit New York, its foot traffic has dropped by 90%, according to the Times Square Alliance, which tracks pedestrians with a series of cameras and monitors.
Much of Times Square’s success has to do with its experience economy: since before commercial advertisements played on the sides of skyscrapers and major clothing stores renamed their stores as experiential, Times Square has been a international market for experience. From the Broadway theaters along its streets, to its many restaurants, to the blinding lights, people come to Times Square to experience the commercial grandeur of New York.
“It’s what people who have never been to New York think New York is, and everyone who has been to New York has been there,” said L&L Holding Co. CEO David Orowitz, whose company is developing a $ 2.5 billion project in Times Square nicknamed TSX Broadway.
Now, as the deadly coronavirus has shut down the city despite many other parts of the country starting to reopen – and tourism should take years to fully recover – the typically crowded streets and shops of the experiential commercial hub have become a potential danger rather than a help, to his perspective.
“With the pandemic, all bets are off,” said Priya Raghubir, a professor of marketing at New York University’s Stern School of Business and an expert in consumer psychology. “Because an experience requires interpersonal closeness.”
According to the Times Square Alliance, fifty percent of Times Square’s foot traffic comes from tourists. Tourism rates in New York City have risen every year for the past 10 years, peaking last year when 80.1 million visitors arrived in the five boroughs. according to a report by New York & Co., a city entity that keeps track of tourism. Many have stayed in New York City hotels, 20% of which are located in Times Square.
Faced with stagnant business and bleak tourism forecasts for the rest of the year, the 452-room Times Square Edition, a piece of Maefield’s 20 Times Square property, once valued at $ 2.4 billion, closed its doors for good just a year after its inauguration.
Levi’s store at 1535 Broadway in Vornado in Times Square.
Over the past five years, experiential retailers have taken Times Square by storm and demonstrated profitable endeavors like online shopping consumed more and more in physical profits. Last year, the demand for spaces like this in Times Square continued to grow.
In the fall of 2019, Times Square had the second highest spot ask for rent in the city after Fifth Avenue, up 2% yoy to $ 1,889 for San Francisco, according to the New York Real Estate Board.
Major domestic retailers have their flagship locations in Times Square, branding their businesses as experience-centric for hundreds of thousands of potential customers every day, while developers have paved the way for new multi-billion dollar retail and hospitality projects. Hands-on, hands-on experiences made shopping in Times Square distinct, experts say.
In 2018, Levi’s moved in its 17K SF flagship store on Broadway between 45th Street and 46th Street at 1535 Broadway in Vornado, which features customizable denim and accessories designed by local artists.
Hershey’s world of chocolate expanded in 2017 at Maefield Development’s 20 Times Square, where shopgoers can create their own packaged Hershey’s bar. Krispy Kreme was ready to open the doors of its new flagship, a 4,500 SF store at 1601 Broadway in Vornado, on the edge of West 48th, for shoppers who could watch the famous donuts made through a cascade of icing. McDonald’s opened its largest venue, a 24-hour restaurant at 1528 Broadway with customizable ordering stations and menu items not offered anywhere else in the US a year ago.
While retail spaces in other parts of the city have lost value, developers have bet that retail space in Times Square will remain in high demand, even as several traditional retailers, such as Old Navy and Gap, have tried to Leave.
New transactions before the pandemic showed that the real estate world was optimistic about the future of the area. Furthermore TSX Broadway, L&L’s 550K SF hotel, experiential retail and entertainment project, Soho Properties is building a $ 350M, 234-room, Jimmy Buffett-themed Margaritaville Resort, which was to open in the fall.
Times Square has already taken a hit from the virus. CBRE’s Q1 report, which took into account the first two weeks of the city’s closure, showed that required rents had fallen by 15.7% year-on-year in Times Square, from $ 1,955 to $ 1,647 for SF, pushing the average below the $ 1,800 threshold for the first time since 2011.
The report found that rental prices were pulled down partly from an “increasingly cautious market” and an increase in area retailers looking to sublet their space.
When the city reopens, it’s unclear how these retailers can deliver the same valuable experiences to customers who show up.
“We are always asked ‘What will the new normal be?'” Said Times Square Alliance president Tim Tompkins. “The honest answer is that it’s extremely difficult to say, because every week there seems to be a new set of facts and figures about how people are approaching this, not just in the 50 states but around the world.”
Times Square retailers have drawn up safety guidelines for their stores to take effect once they reopen.
Nike Consumer and Marketplace President Heidi O’Neill said Good morning America that its Niketown store on Fifth Avenue and Madison Avenue will undergo rigorous cleaning procedures and create signs to help enforce social distancing.
The Sephora beauty store chain has a Times Square location on the ground floor of Vornado’s 1535 Broadway. Before the coronavirus, the retailer’s signature was the trick available for customers to try and try throughout the store.
The company has released new guidelines that completely eliminate testers and implement a king capability in the store. Sephora did not respond to a request for comment on how the new guidelines would impact its capacity levels at the Times Square headquarters.
Tompkins said it’s difficult to predict the future because best practices change every day.
“Some of the key variables are test levels, pre-test grades outside of retail locations, whether it’s heat guns or something else,” he said. “A lot out there that’s uncertain, everything is really speculative in terms of what the answer is.”
In addition to the intentional decrease in store capacity, tourism is expected around the world remain at unprecedented numbers this year. With no tourists, The Bowtie is destined for a painful year.
When experiential retailing reopens in full swing – likely once there is a vaccine or effective therapy – it will be a slow recovery, Raghubir said.
“It will take some time to build consumer confidence,” he said. “I would be surprised if it happened before 2022”.
Raghubir said a full recovery will take even longer.
“I’m afraid it will take some time for consumers to be able to push each other in a crowd, which is part of an experiential retail experience,” he said. “I think there will be fear that holds people back.”
He predicts that the companies that make it will be the ones that have the ability to absorb the cost of loss that retailers in this area will face: big chains like McDonald’s, Taco Bell – which signed a 4K SF lease for its Alcohol-Infused Cantina concept in Times Square this year and the Apple Store.
With the reopening of the city it should start in the next two weeks, the quintessential experience economy in downtown New York City will soon wake up, turn on its lights and reopen its experiential windows. Time will tell how he adapts to the world that changed while he slept.
Orowitz believes that once the medical risk is overcome, the area and its expert dealers will recover.
“A lot of people doing business in Times Square are going through a lot of pain now,” he said. “But I think the infrastructure is there, the demand is still there, the people will still be there and I think when the health risk is gone, business will quickly come back.”
People will still want to come to New York, he said, and that means a visit to Times Square.
“People will still want to be entertained, people will still want to come and interact and experience,” he said. “None of that changes, so the actual activities in the building don’t really change, because brands will still want to advertise to people through signs and stages and present them with experiences that they can only have in Times Square.”