Dating back to the 19th century, the famous department stores of New York (Bergdorf Goodman, Bloomingdale’s, Macy’s etc.) were developed and continue to be owned by the retailers themselves. In some cases, as the fortunes and appeal of certain department store brands waned, it was their real estate that actually retained value because of its locational strength.
For example, Vornado’s Steve Roth purchased the depleted Alexander’s retail chain precisely because of the value of its Manhattan location across from Bloomingdale’s and developed it into Bloomberg’s 731 Lexington Avenue mixed-use skyscraper.
After World War II, most new stores were not typically owned by the retailers, but were in space developed and owned by shopping center developers (later reconstituted into mall REITS) and leased to department stores and specialty retailers. For over 50 years most retail development was channeled into suburban shopping centers.
With the resurgence of urban downtowns over the past 20 years, the focus has returned to “main street” retail and particularly to mixed use developments and nonhomogeneous shopping centers, that often combine shopping, dining, office space and apartments. Interestingly, during the 2010-2020 period, New York City is seeing the largest investment in new and redeveloped retail projects in its history. With the exception of the Nordstrom’s tower, these projects are largely outside the upscale tourist-oriented retail/hospitality core (Fifth Avenue, Madison Avene, 57th Street), that with New York’s tourist boom, has recently seen the largest increases in store rents in history. They follow the post-World War II model of shopping space developed for and leased to retail brands. These range from the redevelopment of South Street Seaport and Brookfield Place to the Shops at Hudson Yards and the Westfield World Trade Center. Each of these shopping centers is geographically proximate, but not necessarily spatially integrated into a much larger mixed-used development. However, with the exception of restaurant and entertainment offerings, these shopping centers are not generally attuned to the consumption habits of those who will live and work in the balance of these developments.
Another model of retail development being pursued by LVMH through its L Real Estate affiliate, which perhaps other global luxury conglomerates would be wise to consider, involves investing in and owning luxury retail-driven urban mixed-use developments in prime shopping/lifestyle neighborhoods where the prospective retail brands (owned by LVMH) generate not only value (and rent) for the investors but in essence become part of the branding of the entire project to attract the highest paying office and residential tenants. This is the basis for L Real estate’s investment in Miami’s Design District (Brand Meets Space) for L Real Estate mixed used retail-center projects in Shanghai, Ginza and Abu Dhabi.