Retail and office are both suffering major disruption due to the structural changes underway in the US economy. But between the two struggling traditional sectors, office has trumped retail at 20 Hudson Yards in New York.
In September, US banking group Wells Fargo agreed to pay $550 million for the 215,000-square-foot space vacated by US luxury retailer Neiman Marcus in 20 Hudson Yards to the building’s developers, US real estate firm Related Companies and Canadian investor Oxford Properties Group.
It is understood Wells Fargo plans to turn the space into offices. This will expand the banking group’s existing presence in the multi-use development on Manhattan’s West Side, where it has owned 500,000 square feet of offices at 30 Hudson Yards to accommodate its securities, investment banking and capital market business since 2020. In 2015, Neiman Marcus signed a 50-year lease for its space at 20 Hudson Yards, which was spread over three floors in the seven-story mall.
The store opened in March 2019, but following the impact of the covid-19 pandemic and the ongoing rise of e-commerce, Neiman Marcus declared bankruptcy and closed the store in July 2020.
“A physical location in Hudson Yards is no longer an ideal space for us given the preponderance of restaurants and future office space in that mall,” a Neiman Marcus spokesperson told CNBC at the time. The space has remained vacant since.
From luxury to prime
When Wells Fargo converts the space, it will represent the only offices in 20 Hudson Yards, home of the wider development’s retail centerpiece The Shops & Restaurants at Hudson Yards. Designed by Kohn Pedersen Fox and Elkus Manfredi Architects, the building hosts over a dozen shops and restaurants including designer brands Dior and Louis Vuitton.
Despite its high-end anchor tenants, the future of 20 Hudson Yards as a retail center looks in doubt. Early tenants including Banana Republic, Sephora and TAK Room all closed their doors alongside Neiman Marcus between 2020 and 2021.
Retail-to-office is not a common form of conversion in today’s market, as corporates reduce their space requirements amid the rise of work-from-home, but this particular deal demonstrates the strong demand for premium offices in New York City. Offices in Hudson Yards saw average occupancy of over 80 percent from Monday to Thursday among tenants, significantly above the average of less than 50 percent in the rest of the city, according to data cited by Related in the Financial Times.
Once completed, the transaction will be one of the largest commercial property deals in Manhattan this year amid a wider market downturn.
If the walls of 20 Hudson Yards could talk, they would be wondering whether the rest of its retail space faces a similar twist of fate.
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