TUESDAY, MAY 29, 2012
Express to Times Square
Express Inc., the Midwestern fashion brand that has been searching for a foothold in Times Square, has walked away from a deal to lease the former ESPN Zone space in Times Square and picked a different location instead, according to people familiar with the matter.
Express has leased roughly 30,000 square feet at 1552 Broadway, at 46th Street, in a space currently occupied by a T.G.I. Friday's restaurant, according to people familiar with the matter. A joint venture of SL Green Realty Corp. and Jeff Sutton bought the building for $136.5 million last year.
Express, a Columbus, Ohio-based chain that sells midprice clothing catering to young professional women and club-hoppers alike, has spoken publicly about plans to increase its international presence. While it already has about a half dozen outlets in Manhattan, opening a flagship in Times Square could be central to that strategy given that some 50 million tourists from all over the world come to New York each year, and most of them walk through Times Square.
But the space isn't cheap. Rents for space in that area are climbing above $1,800 a square foot, according to brokers, although bigger spaces are cheaper. Express could be paying over $20 million a year, brokers said.
1472 Broadway, in which the company had been interested.
"When you're taking on a multistory [Times Square] location, that costs as much as 25 regular stores," says Richard Jaffe, a retail analyst Stifel Nicolaus & Co.
Earlier this year, Express had been close to a deal for a significant portion of the 45,000-square-foot block formerly occupied by ESPN at 4 Times Square, according to people familiar with that matter.
That space has been empty since early last year.
It isn't clear why Express's deal with the owner of 4 Times Square, the Durst Organization, wasn't finalized. Some retail experts speculate that the retailer opted for 1552 Broadway because it is closer to the center of the so-called "bow tie," where Broadway and Seventh Avenue converge.
"Everybody comes to Times Square to see what's going on in the bow tie. Not everybody walks all the way down to 42nd street," says C. Bradley Mendelson, a retail broker at Cushman & Wakefield.
Express, which is known for favorites like the $55 "editor pant" and $40 sequined tops, has lately faced stiff competition in major centers from an influx of similar low-cost-chic fashion giants, such as Sweden's H&M, HM-B.SK -0.64%Japan's Uniqlo and Canada's Joe Fresh. Uniqlo has opened a flagship store on Fifth Avenue, as well as stores on 34th Street and in SoHo, and Joe Fresh also has a flagship on Fifth Avenue and stores scattered elsewhere around the city.
Michael Weiss, the chief executive of Express, said last week on a conference call with investors that the company plans to open major flagships in New York and San Francisco to help raise its profile. The retailer also recently has pushed into markets such as Latin America.
On the call, Mr. Weiss said the company was in the "final stages of consummating a lease" for an undisclosed flagship on Broadway in Times Square. "In New York we had identified a location we were satisfied with. However, a much stronger location became available and we were even more excited about it," Mr. Weiss said.
He said the new location will have prominent signage and will open in the fall of 2013. The company also warned investors that the pricey new spot could affect its bottom line, at least until the store opens and begins to generate revenue.