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WWDICSCPREVIEWSECTION II

Challenging Times

After a wave of store closings and bankruptcies, and as the industry gathers for the ICSC convention

in Las Vegas, landlords in the U.S. and abroad no longer have the upper hand over retailers. They’re

reaching out and negotiating with greater flexibility amid the declining demand for space.

By David Moin

There is no such Thing as a free lunch. Tea and scones, however, can be another matter at the somerset collection, a luxury mall in Troy, Mich.

eileen fisher partnered with tea shop Teavana for a “tea and treats” private trunk show March 19, previewing the spring collection for 65 guests from a mail-ing list of about 250. The tea and scones were served on china and eileen fisher had a big day, between $50,000 and $60,000 in sales. for every $200 spent, custom-ers received a $25 Teavana gift card.

somerset set a much different tone when it hosted a mass pep rally for the Michigan state basketball team, which lost in the final game of the ncaa tour-nament. The mall was never so packed.

“in tough times, you have to do things to drive traffic. You’ve got to be creative,” said nathan forbes, man-aging partner, The forbes company, based in southfield, Mich., and devel-oper of somerset. “we’ve been reas-suring tenants that we are doing things to help them drive sales.”

forbes is just one of many develop-ers demonstrating a cooperative spirit toward retail tenants in these times of retail and real estate bankruptcies, refinancings and consolidations, and that new mood will be evident at the international council of shopping centers’ convention, called recon, in las vegas from May 17 to 20. forbes said he’s been partnering more with retailers on marketing and special events geared to draw more traffic, though other developers are also ex-hibiting flexibility over lease rates, kick-out clauses and construction costs. it’s all an outgrowth of concerns over thinning consumer traffic in the malls and store closings over the past year. The convention, usually a teeming, back-slapping, festive affair is expected to be decidedly low-key, less attended and more brass tacks this year.

“last year, i got 30 invitations to cocktail receptions. This year, i have gotten five,” said forbes.

simon Property group inc. and westfield group have decided to save money by abandoning the leasing floor of the las vegas convention center. instead, they plan to hold meetings with retailers in hotels on the strip, adding an element of inconvenience to retailers. The booths were among the largest and most impres-sive, though icsc said they represented just 1 percent of the leasing space on the convention floor, or 20,000 square feet, and that the space has been reassigned to cB richard ellis group inc., Jones lang lasalle, inland real estate corp., centro Properties group and some other firms seeking greater visibility and more prominent space.

several developers and retailers are sending reduced contingents, with many

saying the teams are 20 to 25 percent smaller. and those who are coming in many cases have decided to leave early, with a two- or three-day stay instead of three or four days. anticipating things will wind down sooner than past years, icsc has decided to conclude the convention at 1 p.m. on May 20, instead of 5 p.m.

Paid registration is tracking about 15 to 20 percent below 2008, according to Michael P. Kercheval, icsc president and chief executive officer. “i think it’s safe to say we will have around 30,000 attending, making it comparable with 2005 and 2006 turnouts. The last two years were extraordinarily large” with around 50,000 showing up. it’s a group that includes retailers, developers, brokers, consultants, bankers, architects and interior designers.

“The good news is the reduction in attendance seems to be from leasing mall staff, banks and other financial companies” and not so much “deci-sion-makers,” Kercheval contended. “developers have determined they don’t need to bring out entire leasing departments. with senior manage-ment from retail and development, we haven’t seen the fall-off and the reduc-tion in registration for retailers is not down from where it was last year.”

There will be a noticeable shift in the character of meetings from 15-minute “meet and greets to half-hour meaningful discussions,” said Kercheval.

while acknowledging the inconve-nience of certain developers situat-ing off-site, Kercheval noted icsc has responded with a free “retail connec-tion” area at the convention center, to encourage developers and retailers to get together. some other attractions are the u.s. conference of Mayors, being hosted by icsc, meaning retailers will be able to meet with mayors and economic development officials from cities such as Miami, Boston, newark,

chicago and st. louis, which are receiving u.s. government stimulus funds.The industry mood is multilayered and tainted by “a little bit of misconcep-

tion that the shopping center industry is directly tied to consumer spending,” Kercheval said. “as sales go down, retail margins are being squeezed, but not so retailers can’t pay the rent. even at general growth [which went bankrupt last month after failing to refinance its heavy debt], the net operating income and the cash flow are fairly strong. That’s because rents are continuing to be paid.

“fundamentally, shopping center companies are pretty sound, even with consumer spending going down. a prolonged depression [if it occurs] will filter back into the shopping center industry, but right now their cash flow looks pretty good. They have plenty of cash to pay interest and a little bit of principle. on the consumer and retailing levels, i really can’t see any meaningful impact from the general growth bankruptcy. general growth has great locations and great man-agement teams,” though it underscores a serious issue. “refinancing and restruc-

SECTION II WWD.COM

ICSC PREVIEW

2 WWD, mONDay, may 4, 2009

Space Glut and Retail RutDevelopers are eager to deal amid rising vacancies and shrinking demand for square footage.

Continued on page 4

Following closings by Mervyn’s and Value City, the Livonia Mall in Livonia, Mich.

was forced to shut down last year.

Alternate use: The Somerset Collection luxury center staged a mass pep rally for the Michigan State basketball team which made the NCAA Championship.

SECTION II WWD.COM

ICSC PREVIEW

4 WWD, mONDay, may 4, 2009

turing loans is the primary problem, not servicing the loans.” Kercheval said occupancy rates industrywide are generally north of 90 percent,

down roughly 3 percent from a year ago and likely to drop further this year. Malls hit with some major retail liquidations will be challenged to find new tenants. “If you lost both Linens ‘N’ Things and Circuit City, that is going to be hard to replace.”

Regarding the convention agenda, he said, “The tone this year is about the people and the professionals in our industry, more than the companies in this industry. We’ve added a lot of programs about personal and professional develop-ment, about how to find jobs and improve your job. We will have an employment opportunity center, called the ‘reconnect pavilion’ with sessions on job coaching, résumé writing and starting a business.”

For the pavilion, which is open to anyone — even those not registered for the convention — ICSC is teaming up with the International Franchising Association and the Community Bankers Association, as well as representa-tives from the federal government and search firms. Wal-Mart; various dollar stores; fast-food chains; middle-market specialty chains such as The Dress Barn Inc., Forever 21 Inc., Hennes & Mauritz and Mango, as well as upscale brands such as Tory Burch and Wilford seeking to open outlets, are expected to be among the most aggressive in hunt-ing for new real estate. Others seen tak-ing a high profile in the quest for space are Jimmy Choo; Christian Louboutin; Judith Leiber; Tous fashion jewelry from Barcelona; Bebe, and the South Korean chain called Who.A.U.

On the other hand, “When we speak with developers and brokers, we hear about a lot of people renegotiating leas-es and quite a few retailers trying to get out of leases,” said Vikram Reddi, pres-ident of Mackenzie Keck Construction, which has built key locations for Abercrombie & Fitch, Hollister, Urban Outfitters, Anthropologie, Ferragamo, Gucci and Versace.

“We were on the fence for awhile, but we are going to the convention,” Reddi said. “We typically attend. For us, it is a networking event. Sometimes we get some work.”

This year, “We are not really expect-ing doom and gloom. Ultimately, what I would like to find out is who is real and who is not real,” said Reddi. “We want to find out from the real estate commu-nity who is actually trying to back out of leases and who has been having trouble meeting rent. We liked to be paid at the end of a project, and we like to target retailers that are capitalized and look-ing to actually expand. It’s one thing to meet with old clients and say hi. We have that loyalty. It’s another thing to try to cultivate new clients. We are cer-tainly not anywhere near as busy as we were this time last year. We are scour-ing the market for new opportunities, and there are opportunities. It’s mostly middle-market stuff.”

“If you are interested in making deals, you can really make deals. This is going to be one of the real deal-making conven-tions,” said Faith Hope Consolo, chair-man of the retail leasing and sales divi-sion of Prudential Douglas Elliman, who has the exclusive on Who.A.U. — which she described as a cross between Polo and Abercrombie, serving ages 12 to 18 — in 8,000- to 12,000-square-foot boxes.

“Shopping owners and developers are making some of the most reason-able deals I’ve seen,” including in some cases giving a year’s rent-free and taking on building costs. “Really aggressive deals can be made now,” Consolo said. “Before, it was take it or leave it. You had to take a dozen mall locations, meaning you would get three good ones and the rest you could die. Now it’s developers saying, ‘Tell us what you want.’ It’s a dif-ferent tone. It’s very friendly.”

“National tenants are hiding in a shell,” said Steve Greenberg, president of the Greenberg Group Inc. retail real estate advisers. “Other than the outlet business, the retail business is just decimated.

“I will say there is more good real estate available at better prices than we have seen in many, many years,” he continued. “We see landlords being overly co-operative to work with tenants who want to lease space. If you are a good brand, like Lacoste or Façonnable, you will find that the big REITS have been extreme-ly cooperative. They want to make it palatable for retailers to open new stores. There is a wonderful sense of community and cooperation. Misery loves company and through pain. People gravitate towards one another and problem solve.”

He said that thanks to a couple of bankruptcies, he was able to secure some “wonderful” spaces for a client, Vince, the subsidiary of Kellwood.

Greenberg encouraged participating in the convention. “If you don’t get in the mix of things, you limit your opportunities. The landlords and tenants that are there are serious about business. They’re not going for the cocktail hour. You can do business anywhere, but nothing replaces a face-to-face meeting and the opportunity to meet senior executives. If you want to see Billy Taubman, he’s at the Taubman booth.”

“There is value in catching up with people on the fly, seeing what projects are out there, even if you are there for one or two days,” said Raymond Brunt, a part-ner in Stanbery Development, a nine-year-old developer of upscale specialty cen-ters featuring a mix of fashion and food retailers in 90,000- to 150,000-square-foot settings. “There is a lot that can be learned by wandering around the convention.”

Stanbery has two developments opening soon — Shoppes at Hamilton in Hamilton, N.J., on May 30 and Shoppes at Cross Keys, Gloucester, N.J., on Aug. 1. One project is on hold, the Shoppes at Lake Manassas in Gainesville, Va. “You’ve got

to get a certain amount of leasing filled before you can move forward with the project. Several retailers were willing to move forward and even signed letters of intent, but they put the brakes on.”

He described them as national re-tailers that were key to getting other re-tailers signed up, too. Typical specialty anchors at Stanbery projects include Banana Republic, AnnTaylor Stores Corp., Chico’s FAS Inc., The Talbots Inc., Coldwater Creek Inc., Jos. A. Bank Clothiers, Children’s Place Retail Stores Inc. and New York & Company Inc.

“It’s no secret. Fewer retailers are doing deals,” Brunt said. “There are more retailers going out of business than going into business. The value of space has diminished because of supply and demand. This is a perfect storm for a retailer that is looking to take on the chore of wanting to expand at this time. If somebody has the capital, wherewithal and the stomach to expand in this world, they can take advantage of opportuni-ties. Retailers are more in the driver’s seat than they were three years ago.”

“People are coming to the conven-tion to do deals, or they’re not coming at all. That is the biggest difference this year,” said Mary Lou Fiala, vice chairman and chief operating officer of Regency Centers, and the outgoing chairman of ICSC, to be succeeded by Peter Sharpe, president and ceo of The Cadillac Fairview Corp. Ltd.

Although Regency is sending 75 people to the convention, compared with 100 last year, “I think we will do about as many deals as we do typically, though the momentum has definitely changed from the developer holding the cards to the retailer.”

She said Regency’s retail leases are being signed at “moderately lower” rates while renewals are holding steady.

Fiala sees drug stores, groceries, discounters and moderate-priced res-taurants as the best performers in shopping centers lately. “The consumer is out spending, but certainly at a dif-

ferent level. It is still difficult in discre-tionary and luxury businesses.

“However, you will start seeing more positives by the fourth quarter. Everything stopped in November and December” of last year. “We are going to be up against those numbers, and unless some catastrophic event occurs or unemployment goes significantly higher, there will be more spending in November and December this year than people might anticipate.”

Forbes said he was also reducing his contingent to ICSC, down to about 12 staffers, from 15 to 20 in recent years. He also said a project in Sarasota, Fla., in partnership with Taubman Co., was put on hold due to difficulties financing and leasing the property.

“Tenants expect to see some form of representation,” Forbes said. But they shouldn’t expect to see reduced lease deals, even though there’s been a slight reduction in Forbes’ occupancy rate from 98 or 99 percent to 95 percent.

“We haven’t changed our terms,” Forbes said. “We are not offering induce-ments. We still have highly productive centers, and we are not about to negotiate from weakness. There might be a temporary blip in sales, but this is not going to jeopardize 10 years of strong economics.”

As far as the outlook, “We are going to continue to see a rocky reporting of business. Certain categories will be OK; certain others will struggle. There might be better months ahead, but I am not anticipating any strong trend upward with any sustainability this year,” he said. “My outlook on the [more distant] future is really bullish. This country is very resilient. Retailers are very resilient. They will find a way to create different products, different price points and different perceived value.”

Continued from page 2

Stanbery Development’s Promenade at Coconut

Creek in Florida.

The ICSC convention drew a big crowd last

year, but registration is down for 2009.

“ Fundamentally, shopping center companies are pretty sound, even with consumer spending going down. ”

— Michael P. Kercheval, ICSC

SECTION II

6 WWD, MONDAY, MAY 4, 2009

ICSC PREVIEW

Market by Market: Europe’s Ups and DownsRents and real estate values decline in a shrinking economy.

By WWD Staff

MILAN — Declining output, rising unemployment and a lack of cheap debt have made for a difficult year for the commercial realty market in Europe, and with the economy set to contract 4 percent in 2009, more pain is anticipated over the next 12 to 18 months.

Retail property capital values fell by a fifth in Europe last year and are set for further declines, ac-cording to real estate services firm Jones Lang LaSalle. Occupancy levels are down, particularly at secondary and tertiary retail locations and development is slow-ing. Realty advisers Cushman & Wakefield reported last month that up to 75 million square feet of planned shopping center development in Europe has been put on hold or canceled as a result of the credit crunch, including in emerging markets like Russia, Ukraine and Turkey. (The firm forecast 107 million square feet

of new mall space would be built across the region in 2009 and another 75 million square feet in 2010. Next year would represent the slowest rate of expansion since 2005 and bring to an end five consecutive years of growth in shopping center development.)

Tenants are also becoming more demanding. Vittorio Radice, chief executive officer of Italian de-partment store chain Rinascente, said he was rene-gotiating the group’s rental agreements, looking for more flexibility, shorter lease terms and even tying rates to turnover.

“Times are tough,” said Radice. “The pain has to be shared.”

But all is not doom and gloom.Prime retail locations are so far proving resilient to

the downturn due to high demand from luxury labels, which continue to clamor for doors on the most presti-gious streets, despite declining profitability.

For example, so far this year, Lanvin has opened on London’s fashionable Mount Street, where spaces are said to rent for 200 to 265 pounds, or $290 to $390, a square foot. Marc by Marc Jacobs and Rick Owens opened boutiques around the corner on South Audley Street, Prada launched its second unit in Madrid on the Calle Serrano, Paul Smith opened his first wom-en’s-only Paris boutique on Rue de Grenelle and Cartier opened a store in the 15th-century Palazzo Corsi-Tornabuoni in Florence.

Meanwhile, Belstaff is set to open units in Prague, Bucharest, and Barcelona over the next four months, and clothing retailer C&A said in April it plans to ex-pand its retail network in Europe, after reporting a rise in full-year sales and market share.

Outlets are also gaining importance as consumers focus more on value and high-end retailers look to shift overstocked goods at discount.

Scott Malkin, chairman of Value Retail, which oper-ates Chic Outlet Shopping in Europe, said there has been a dramatic uptick in demand for space at the group’s nine sites across the region.

“Our outlets are key retail streets….We serve a purpose that cannot be served elsewhere,” Malkin said of the shopping villages, which are an hour’s drive from London, Paris, Madrid, Barcelona, Milan-Bologna, Brussels-Antwerp-Cologne, Frankfurt, Munich and Dublin. “[Brands] that were focused on emerging markets are coming to us to help drive the performance of their current business.” Malkin cited double-digit year-to-date increases in foot traffic, gross sales and same-store sales per square foot over-all in Europe.

By location, like-for-like sales were up by single digits at Laz Rozas Village near Madrid and La Roca Village near Barcelona and flat at Kildare Village near Dublin, which was “incredible” compared with 40 to 50 percent drops at department stores in Spain and Ireland, Malkin said. Meanwhile, comparable sales were up by double digits in Italy; Germany; Benelux, France, and the U.K.

Chic Outlet Shopping in Europe expects double-digit sales growth this year.

After luxury firms, Mark Burlton, who heads up Cushman & Wakefield’s cross border retail business in Europe, said discount players were by far the most active tenants in the region, citing TK Maxx — which operates in the U.K., Ireland and Germany and is part of U.S.-based TJX — and Primark as examples of companies that could take advantage of the economic situation.

By country, experts said the U.K. realty market had been hit hardest and fastest by the economic crisis, with capital values down more than 40 percent from their peak in June 2007 and yields down to around 4.5 to 5 percent from around 7 to 8 percent.

“Values have fallen much more quickly,” said Richard Barkham, group research director of real es-tate company Grosvenor Group Ltd. “We expect other regions to catch up.”

Compounding matters, economic output shrank by 1.9 percent in the first quarter relative to the fourth quarter of 2008, hitting occupancy levels. The average availability rate on top streets in the U.K. was 11.2 per-cent in February compared with 6 to 7 percent in pre-vious years, following bankruptcies over the Christmas period, which added another 850 spaces to the market, Cushman & Wakefield said.

Accordingly, monthly retail rental values fell again by just under 1 percent in March. Some landlords are even offering 12- to 36-month rent-free periods to stim-ulate demand, experts said.

John Strachan, head of global retail at Cushman & Wakefield, said tourists flocking to London to capitalize on the weak pound had supported tenancy levels in the West End, but streets that depend on locals for trade, such as Chelsea’s King Road, were performing less well.

“Times are tough. The pain has to be shared. ”

— Vittorio Radice, Rinascente

European commercial retail has seen declines, and many developers are scaling back plans to open more shopping centers.

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However, the picture worsened outside the capi-tal, according to Michael Gutman, managing director of Westfield Shoppingtowns Ltd., which operates the Westfield London shopping mall.

Gutman said the 1.7 billion pound, or $2.5 billion, Westfield London Mall — the largest urban shopping cen-tre in Europe — which opened in the fall, did so at “a very difficult time…but with almost 12 million people visiting the mall in the last six months, we’re well on target.”

Strachan said the majority of retail developments in the U.K. had been shelved, except where work had already begun, as in Cardiff and Stratford. He added this would lead to “a big drop in available space in the future.”

Tim Bogan, head of international sales at real estate consultants Berlin Capital Investments, said the German realty market, particularly in Berlin, where rents are 20 to 30 percent lower than in London, was in better shape than the U.K. and would probably emerge from the cri-sis the most unscathed of any European country.

“Germans are safe with their money, so they haven’t had the problems of a subprime market,” Bogan said.

In its first quarter report, Jones Lang LaSalle’s Kemper German subsidiary, showed continued expan-sion in apparel retail tenancy in Germany in the first quarter of this year and forecast a solid rental market in prime locations in the second quarter, although there were signs of less interest in second-tier sites.

Bogan said smaller and cheaper units in poor-er areas of Berlin like Neukölln, Kreuzberg and Reinickendorf, were standing empty, with shopping malls, such as the new Alexa near Alexanderplatz, re-ducing rents to attract tenants.

“If something’s empty, it’s either because the rent is too high or the quality of the space is not good enough,” Bogan said. “Good quality commercial space in the city center can still be rented out well.”

Cushman’s Burlton cited a similar picture in Milan. “There are some substandard opportunities, which will hang around for ages, and others, which will be pushed back a couple of years…but prime sites with waiting lists will remain prime.”

Kemper’s Jones Lang LaSalle said units of 1,100 square feet to 2,700 square feet remained the most sought-after size, but there was an increase in inter-est in smaller spaces under 1,100 square feet. So far this year, 880 new store openings have been announced in Germany, while large-scale developments, such as Berlin’s Humboldt Marina, which mixes residential, government and commercial space, are continuing.

“The smaller projects in the pipeline might be de-layed, but the big, spectacular projects are all going ahead,” said Mangus Danneck, marketing manager of Kemper Jones Lang LaSalle.

In Berlin alone, there are 22 malls ranging from 19,300 square feet to 538,000 square feet for a total of 4.3 million square feet, currently on the drawing board. By 2012, the German capital could be studded with more than 60 shopping centers for a population of around 3.4 million people.

Danneck said the situation could be more difficult in mid- and small-size towns but said there was still strong interest in new urban mall developments in towns and small cities with a good central setup.

Looking ahead, experts said it was impossible to predict the timing of a recovery.

“Sooner or later, greed will replace fear again. It de-pends on the availability of cash and effectiveness of economic stimuli in place,” Burlton said. “My gut feel is that there will be a rally in the third quarter ahead of Christmas, then a retreat as people look to see the effect, and then a steady improvement in 2010…al-though next year will be weak generally.”

In the meantime, cash-rich investors are set to pounce on distressed opportunities.

“The stressed market will bring opportunities to buy assets that would not otherwise be available,” a spokesman for Grosvenor said.

By Amanda Kaiser

TOKYO — The Ao building, a newly opened retail and dining complex, makes quite an architectural statement — one its retail tenants hope can lure shoppers despite Japan’s downtrodden economy.

The 16-story tower is an asymmetrical feat of en-gineering, particularly in earthquake-prone Japan. A triangular sliver is cut away from its rectangular form, and the upper floors are actually larger than those beneath them. The glass-paneled structure defies gravity, thanks to an elaborate network of 60 shock-absorbing dampers. The entire complex is even more dramatic at night, when it’s illuminated by colored lights.

But that’s not the only striking aspect of the development in the Aoyama neighborhood off Omotesando Avenue. It’s also the latest destination building to emerge on the scene here, attempting to lure consumers away from sprawling shopping centers and department stores.

The Ao building, consisting of the tower and a squarish structure beside it, hosts a mix of tenants, including Chanel’s first all-beauty store; Naturalizer; Bobbi Brown; RMK, and Kinokuniya, a high-end su-permarket known for its imported goods. The build-ing is also home to a crop of fashion and accessories boutiques, such as Tila March, Tibi and Ashleigh Verrier. Two Rooms, a restaurant and bar with an outdoor terrace, occupies the fifth floor and provides some stellar views of the neighborhood.

“I’d like this building to be well-known all over the world,” said Toshiro Tamaki, director of sales at Daisho Co. Ltd., the company that oversaw the proj-ect. He declined to disclose an investment figure, but a source at another Tokyo real estate concern estimated the building cost upwards of $200 million to construct and develop.

Tamaki said the building, designed by a rela-tively unknown architect named Atsutoshi Ozaki, has a scope that is both local and international. It

seeks to serve the neighborhood by offering every-day items like groceries and cosmetics, and also put the Aoyama district on the map for foreign tourists, Tamaki explained.

Daisho has secured contracts for all the retail spaces in the building, although some of the office spaces in the upper floors of the tower are still va-cant. Tamaki acknowledged filling the building was a challenging task as Japan’s economy sank into a recession over the past year.

“We had incredible difficulties trying to get ten-ants into this building,” he admitted. “It was very dif-ficult.” Although Daisho stood firm on rents, it helped sweeten the deal by offering retailers some additional space and flexibility to come up with store concepts.

“That is very important for them so they can ex-pose their [brand] name,” he said.

The Ao building, a project that took about four years to complete, is the most recent addition to a constellation of shopping and entertainment build-ings in Tokyo.

In late 2007, the Gyre building on Omotesando Avenue opened its doors. Dutch architects MVRDV designed the angular structure — housing Chanel, Bulgari, Maison Martin Margiela — and a host of gourmet food shops and restaurants. On an even larger scale, the Shin-Marunouchi building oppo-site Tokyo station also opened in 2007 to accommo-date restaurants, stores and offices.

Richard Collasse, president of Chanel Japan, said these new retail outposts offer brands some advantages. For one, they tend to provide more space than the average shopping mall. Even a lux-urious epicenter like Tokyo Midtown doesn’t offer large enough units to accommodate a Chanel bou-tique, he said. Plus, these smaller, more focused retail buildings can be a chicer and less chaotic alternative to shopping centers.

“I think that these shopping malls are made for those people who are, you know, starting to build their life, and they have different…priorities,” he explained. “[The mall concept] is very well-done, but I don’t think we can be there.”

As for Chanel’s beauty store in the Ao building, it occupies the ground level, along with two other beauty brands: RMK and Bobbi Brown. Tamaki said he thinks the strong track record of all three brands will help drive traffic at Ao.

“We believe those three can gather a lot of cli-ents for this building,” he said.

Tokyo’s Ao Dares to Be Different Striking 16-story design screams for customers’ attention.

“I’d like this building to be well-known all over the world. ”

— Toshiro Tamaki, Daisho Co. Ltd.

Ao’s retailers hope to buck Japan’s ailing economy.

Rinascente is looking for ways to lower costs.

By Sharon Edelson

NEW YORK — The Standard Hotel pierces the sky over Washington Street, towering over older and smaller neighboring buildings below. André Balazs’ stylish venue, now in soft-opening mode, is but one ambitious undertaking to be fully realized in the Meatpacking District. Other long-awaited projects coming closer to fruition include the Whitney Museum of American Art’s downtown outpost and the High Line, an aban-doned elevated freight railroad that’s being converted to a public park stretching from Gansevoort Street to 34th Street.

While other areas of Manhattan are struggling, the developments in the Meatpacking District show there continues to be demand in the hottest neighborhoods for retail and commercial space despite the ongoing recession. In the region bordered by West 14th Street to the north, Gansevoort Street to the south, Ninth Avenue to the east, and West Street to the west, former meatpacking facilities are being turned into sleek re-tail spaces, and mixed-use buildings are rising. Hugo Boss, Matthew Williamson and Tory Burch have all opened new stores. Bistro Bagatelle, with an alumnus of Alain Ducasse and Daniel overseeing the sauces, bowed last year, along with Marcus Samuelsson’s Merkato 55.

With restaurants, designer boutiques, luxury hotels and a certain gritty charm, the Meatpacking District would seem to have everything necessary to be a shop-ping hub. But what the neighborhood lacks is steady seven-day-a-week foot traffic, the kind of consumer crush one sees in SoHo on the best of summer days.

“The public transportation isn’t great — yet,” said Laura Pomerantz, a principal at PBS Realty Advisors. “The reality is you’re going to have the High Line, and people will be using it as a means of transportation as well as a park.” Besides the High Line, those with an interest in the neighborhood are hoping the Whitney

and Standard will attract enough people to turn the area into a daily destination.

Rents in the Meatpacking District have soared to $500 a square foot from $65 to $70 a square foot in 2005, with smaller spaces commanding higher rents, real estate brokers said.

“I am very committed to the Meatpacking District,” said Diane von Furstenberg, whose world headquar-ters and flagship are on Washington Street. “I was in-volved in raising funds for the making of the Historical District, my husband [Barry Diller] and I have been the largest contributors to the High Line. I love the neighborhood…and I think what is happening to it is exciting. Good architecture…good design.”

Charles Blaichman, founder of CB Developers, is marketing his Morris Adjmi Architects-designed build-ing at 450 West 14th Street, an 11-story office tower on top of an existing five-story former meatpacking fa-cility. The High Line will run through 103 feet of the building, which will have its own entrance to the el-evated park. Of the 7,800 square feet of retail space at the building’s base and 4,000 square feet below grade,

Blaichman said, “In the last month and a half, we’ve had a lot more action. People are back looking again. We’re moving forward. The area is still very bustling, and a lot of good tenants exist there now.”

Blaichman, who also owns the Theory headquarters’ building on Gansevoort Street, said he’s asking $350 a square foot at 450 West 14th Street. So far, Helmut Lang has leased two full floors of the tower for offices and a showroom. “There are some larger retailers looking,” he said. “This has a different character than SoHo. People from around the world know this area.”

“There’s a few amazing luxury retailers that want the whole building,” Jared Epstein, vice president of acquisitions and leasing at Aurora Capital Associates, said of 21-27 Ninth Avenue, which has been redevel-oped. “They want a second location or want to move off Madison Avenue.” The building has 20,000 square feet of space, and the company is removing the major-ity of the second floor to create 20-foot ceilings for the ground floor. Sources said Louis Vuitton may be close to a deal for the space, which has a $2.5 million-a-year asking rent.

The larger-size floors of buildings in the Meatpacking District have reportedly drawn the in-terest at times of Uniqlo, Ralph Lauren, Dolce & Gabbana, American Apparel and Barneys New York, which was the subject of rampant rumors in the win-ter and fall. The retailer never signed a lease and is thought to be out of the market, while the other firms never did deals. H&M is the latest retailer said to be eyeing the area.

“The success of the Meatpacking region is the di-versity of its restaurants, clubs and retailers,” said Roger Eulau, a retail broker at Lansco who manages 416 West 13th Street, where Fig and Olive, Michael Angelo’s Beauty Wonderland and the Atrium Salon are located. “It’s an area that has its own character. In the Meatpacking District, there’s no residential until you get north of 14th Street or south of Gansevoort

SECTION II

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8 WWD, MONDAY, MAY 4, 2009

The Meatpacking District’s Latest ChapterDiversity is coming in the shape of museums, recreation and more retail.

New architecture juxtaposed against traditional Meatpacking buildings is reshaping the area.

414 West 14th Street will be part of MPD Design ’09.

Street, and there never will be. That’s a little bit of a disconnect. But the area has hotels and will have the Whitney. Having that mix is more positive than a lot of other neighborhoods.”

Darryl Romanoff, whose family has owned property in the Meatpacking District for more than 80 years, has proposed a 13-story glass tower for the corner of 13th Street and Washington Street. Romanoff went before the city’s Board of Standards and Appeal last week to ask for approval to build four stories higher than local zon-ing laws permit. The project reportedly has the blessing of von Furstenberg and a source who attended the meet-ing said, “There was a lot of support for that project.”

The Meatpacking District developed in fits and starts. Jeffrey Kalinsky was the first to colonize the neighborhood for fashion, when he opened a 14,000-square-foot flagship on West 14th Street in 1999. Alexander McQueen opened a store in 2005. Stella McCartney and von Furstenberg arrived in 2007. Pastis,

which opened in 1999, developed a following. SoHo House, a version of the U.K. members-only clubhouse, was unveiled in 2003, followed by the Gansevoort Hotel a year later.

There was a time when the Meatpacking District appeared to be in danger of flaming out, succumbing to the same fate of other neighborhoods that became too trendy too fast. But designers continued to move in, and Apple raised the neighborhood’s profile when, in 2008, it opened a store on West 14th Street.

While some area residents bemoan the closings of neighborhood institutions such as Florent restau-rant and Hogs and Heifers and the fact that stiletto-heeled women now outnumber men in white blood-splattered coats, others cite the world-class architects such as Renzo Piano, Morris Adjmi Architects, Polshek Partners and Diller Scofidio + Renfro working in the Meatpacking District.

The neighborhood even has its own signature hip

event, Meatpacking District Design, now in its fourth year. “It’s been an unbelievable transformation,” Abe Gurko, one of the event’s organizers, said of the Meatpacking District.

Meatpacking District Design ’09, which takes place from May 15 to 17, is modeled after the Salone Internazionale del Mobile in Milan. This year’s theme of architecture is apropos and will be the subject of a panel discussion. The check-in center will be at the Standard Hotel and the model of the Whitney will be unveiled in the window of Diane von Furstenberg’s store. An empty building at 414 West 14th Street will serve as a pop-up gallery for the design event with an installation of shoes made by students at the Fashion Institute of Technology. The building is being marketed by PBS and has 21,000 square feet of retail space.

“We’re at the budding stage of signing some really good tenants for both the retail and office space,” said Pomerantz.

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9WWD, MONDAY, MAY 4, 2009

Luxury brands are said to be interested in 21-27 Ninth Avenue.

At 450 West 14th Street, retail tenants will be below the High Line.

SECTION II WWD.COM

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10 WWD, MONDAY, MAY 4, 2009

Texas Socialites Talk Shopping Recession-Style

Less is in vogue — even in Texas. WhiLe The Lone star state isn’t suffering in the recession as much as California, Florida, Michigan and other locales — with 6.7 percent unemployment in March versus the national figure of 8.5 percent — the downturn still has affected the previously free-spending habits of Dallas socialites. They still shop the high end, travel and party, but are venturing into their favorite retailers for specific needs and investment pieces and sometimes shopping their closets.

— Holly Haber

Natalie ChuChu is a native of singapore, where her late grandfather

Wee Kim Wee was president. she now lives in highland Park with her husband, attorney Wilson Chu, and daughter. she was mulling the purchase of a $4,000 Roland Mouret gown last week when she spoke to WWD.

“i have to say that right now, shopping is a surgical strike. i’ll go to downtown neiman’s if my salesperson calls me, but i don’t love trawling the [Dallas] malls. i do my best shopping when i travel to singapore and europe. That’s when my mind is more at rest and i’m not running to carpool. i love all the Chanels in singapore — four in a one-mile radius and it’s younger and more fun and you get tax back. ngee ann shopping Center is the best. i’m buying more investment pieces that i can wear a couple times and mix it up. i bought a black wool Chanel jacket that i can wear casually or with dress pants.

“You rethink your values. You get five invitations a day, and now i’d rather hang out here with my child. i’m volunteering more — i’d rather give back than keep spending money on myself.”

Jeanne Marie ClosseyClossey’s charm and style have helped make her a

leading Dallas fund-raiser, and she’s chairing her biggest project yet: four days of parties and performances to unveil the $320 million Dallas Center for the Performing arts from oct. 14 to 17.

“i definitely am shopping much less, and i’m not buying as expensive clothing as i did before. When you look at your portfolio and it’s half the value that it used to be — that’s daunting. and when you see how many people are suffering, an expensive dress doesn’t seem like the place where i want

to spend my money. Plus, i have such a great closet that i’ve been shopping in. i realized i don’t need a new dress for every occasion.

“This spring i have cut my shopping by at least half, maybe three quarters. i bought three pairs of shoes — i cannot go without a new pair of [Christian] Louboutin shoes — but usually i might have bought six. Today, i bought a pretty Lela Rose dress at neiman’s downtown that’s fun and reasonably priced and i can wear it a lot of places. i worry about fall because there will be so many social events, and i doubt i can slash my budget that much. i’m sure i’ll spend money.”

Tina CraigCraig transformed her shopping obsession into a profitable

blog via bagsnob.com. her family resides at Craig Ranch, a community her husband, David, is developing in suburban allen.

“Before the recession, i probably shopped once or twice a week, and now it’s twice a month because i want everything, so i’m removing myself from the situation. i shop at northPark [Center], highland Park village, Forty Five Ten and [allen Premium] outlets. i just bought five pairs of winter shoes at Last Call that were 75 to 90 percent off.

“i’ve probably cut back 40 percent. My husband basically said, ‘You take over your bills, or you will stop shopping,’ so i took over my bills. all the husbands were saying, ‘if you can’t eat it, don’t buy it.’ Women should be financially independent, and when you come home with loads of bags, your husband just helps you put it away. i used to hide my bags in the trunk and an argument would ensue. now we don’t know what to fight about.

“i’m not cutting back on hermès bags because those are investments, better than the stock market. i have a fund of CDs so when a great hermès bag comes up, i go into my little fund and pay for it. other people have college funds; i have an hermès fund.”

Heidi DillonDillon founded and leads the Fashionistas, a group

raising funds to establish a fashion museum in Dallas. she lives in Dallas with her husband, Bill, a senior associate dean at southern Methodist university, and their son.

“i am probably buying half of what i used to buy. i’m older and my husband is nearing retirement age, and with the shifts in the economy i became more chastened and circumspect about how i spend money.

“Dallas has always been a place where people love to get dressed and they dress well, but it has gotten a little more casual. Black-tie events that used to require a long gown have gone to a cocktail dress, like the art Ball.

“i bought a number of dresses for this spring that are inexpensive, easy things to throw on, the sort of dressing where it’s not fussy and you don’t have to change your clothes three times a day. i like Diane von Furstenberg a lot — her prices are reasonable and it fits well.”

Pat Smithsmith, mother of four, appears regularly on “good

Morning Texas” and supports charities with her husband, emmitt, the hall of Fame Dallas Cowboys running back.

“i have definitely cut back. We’re in a recession, and i’m concerned because none of us know where this is going. We just got back from africa, and it tore my heart to see the poverty there.

“For casual, my closet is overflowing with clothes that i took for granted before. now that i’m more conscious, i take pieces and mix them up and it looks like a totally different outfit. My husband is always reiterating that he believes less is more.

“i still shop for events or special occasions. i go all over — gregory’s [at galleria Dallas], northPark shopping Center and Tootsies. i throw in [inexpensive] stuff from sam Moon shopping Center, and i still get compliments on it.”

Kimberly Schlegel WhitmanWhitman is working on her fifth book on entertaining,

but much of her time is devoted to her toddler son, J.R. her husband, Justin, is managing partner of a building materials company.

“My mom and sisters used to love to go shopping together once a week and get lunch, and now it’s more like once a month. i started cutting back last year, and this year i’m probably spending one third or less of what i spent in 2007. i’d rather put extra money into charitable projects or activities i can do with my family.

“every once in a while, i get a chance to go to some sort of shopping event, like a party at Carolina herrera or party for Monique Lhuillier at the Joule [hotel]. she had cash and carry for spring and summer, and we bought this great necklace. i love highland Park village and northPark, and we love to shop on Rodeo Drive in L.a.”

By Valerie Seckler

More consuMers in the u.s. are planning cuts in discretionary spending in the next 12 months than the consumers in eight other regions worldwide — and apparel is the number-two item on americans’ lists of things to cut back on, ac-cording to a new report.

nearly three-quarters of american adults polled in March by Boston consulting group projected they’ll be parting with fewer discretionary dollars, the consultant disclosed in “Winning consumers through the downturn,” a global survey on consumer sentiment conducted among 21,800 people.

u.s. consumers expect to slash outlays by an average of 18 percent — a deeper dent than that anticipated by the populations of any of the other locales.

apparel also registered as a sinking priority in four other countries: Japan, Brazil, china and Mexico. as in the u.s., clothing was the second most likely prod-uct to see diminished outlays in those places.

in the european union, fashion accessories rated number one on the list of anticipated pullbacks.

overall, travel-vacation was earmarked as the top category for cutbacks, followed by restaurants-fast food.

the biggest part of budget cutters in the u.s., four in 10, said they’re planning to save more. another three in 10 curtailing discretionary spending said they expected to be earning less, and an equal share cited worries over possible job losses as a reason for tighter purse strings.

the “starbucks effect” — tossing $3 or so, which might otherwise have been saved, into a cup of coffee — does not appear to be evaporating in the u.s., how-ever. about two-thirds polled here haven’t begun purchasing less costly coffee or tea and don’t plan to, and another 2 percent are buying more expensive types of these drinks or plan to do so, according to Bcg.

this enduring taste for upscale beverages doesn’t point to renewed optimism about the economy’s prospects, though.

More than half of america’s consumers, or 56 percent, expect the “economy will get even worse in the next 12 months,” trailing only those in the european union (60 percent) and russia (59 percent) in their pessimism. this marks a 24 percentage point deterioration of confidence in the u.s. since october, when Boston consulting group last surveyed consumers worldwide.

a big spike in the american public’s “anxiety about the future” steepened the slide, compared with americans’ moods six months ago, according to the new report on consumer sentiment. people in the u.s. registered as the third most anxious, with 63 percent of those surveyed noting such feelings. Most anxious were the seven in 10 russians and two-thirds of Japanese polled, who expressed the same mood.

not surprisingly, people in the u.s. are saying they’re most likely to cope with tough economic times by significantly decreasing spending on “nonessen-tial items” and deferring “major expenses that can wait.” also in their game plans is purchasing more products that are discounted or otherwise promot-ed, spending more time shopping for the best prices and shopping at discount stores more often.

Apparel is Dispensable, Survey Findsu.s. consumers are first to cut clothing.

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