clock menu more-arrow no yes

Filed under:

The Future of Macy's Herald Square May Include SoulCycle

Stephen Chernin/Getty Images

Racked is no longer publishing. Thank you to everyone who read our work over the years. The archives will remain available here; for new stories, head over to Vox.com, where our staff is covering consumer culture for The Goods by Vox. You can also see what we’re up to by signing up here.

Macy's is serious about maximizing the potential of its real estate holdings while reimagining what a department store can be. In addition to redeveloping its Brooklyn location while beefing up the brands at Herald Square to attract millennials, chairman and CEO Terry J. Lundgren "said the company will consider joint ventures or other tie-ups to redevelop portions of its key stores in a way that maintains a robust Macy's presence while bringing alternative uses to the buildings," in a recent earning calls with investors, according to WWD.

Or, in the words of independent investment research firm Morningstar's Bridget Weishaar, "You wonder whether Macy's couldn't run their stores like shopping malls, with a spa or a SoulCycle or a gym."

While this applies to Macy's stores worldwide, there's always a focus on the Herald Square store, which is estimated to be worth up to $4 billion, when conversations like these come about. "The ground floor of Macy's [Herald Sqaure] is worth a fortune," Joanne Podell of real estate firm Cushman & Wakefield told the paper. Plenty of brands wold love "a chance to own a piece of the most famous flagship in the world.

"Macy's can be selective," about who comes in, she continued. "A vendor with an ownership stake in the property may be more invested in the store — no pun intended — and do a better a job." Retail rents for ground-floor space around the store currently go for up to $1,000 per square foot.

"Macy's could lease a property for the next 99 years," said Jared Epstein of investment banking firm Aurora Capital Associates. "Not capitalizing on this opportunity in the current climate would be a mistake."

Another idea is that Macy's could convert what currently serves as company offices and storage within the building to another brand — Crown Acquisition's Stephan Stephanou name-checked Apple or Microsoft — that would generate dollars for Macy's both in volume of product sold and in annual rent. "if Macy's exited 30,000 square feet of space on three levels at the Herald Square flagship, they'd get about $14 million in rent," added Jeffrey C. Paisner of Ripco Real Estate.

However, don't expect to see yellow bikes or Apple Watches anytime soon: "We are very early in this process," a Macy's spokesman said to the paper. "You can count on the fact that we and our advisers will consider all potential alternatives."

Macy's

422 Fulton St, Brooklyn, NY 11201 (718) 875-7200 Visit Website