“We wanted to send a message that New York is still here. It’s not going away,” Tompkins told CNN Business.
“2021 is certainly going to feel more upbeat than 2020 did, but I think there will also be some disappointment,” said Douglas Hercher, managing director at RobertDouglas, a private real estate investment bank. “If people are thinking Times Square, by the summer, is going to look like the Times Square we all know and love, that’s probably not going to be the case.”
Hotels and retail
Tompkins says about 43% of Times Square’s street-level businesses are currently closed, down from 87% in the spring. Hercher estimates 25%-30% of retail rental spaces in Midtown have “gone dark” due to tenants shuttering indefinitely.
“That’s the state of affairs right now,” he told CNN Business on Wednesday. “You’re going to see those retailers reducing their footprint to bring their costs in line with their sales. … I think rental rates are going to have to come down tremendously to attract tenancy to those spaces.”
Hercher expects the downturn will worsen through February, making it extremely difficult for the most revenue-starved retailers to maintain their presence at the Crossroads of World. But Paimaan Lodhi, senior vice president of policy and planning for the Real Estate Board of New York, notes that Time Square’s rent rate reductions have also creating opportunities for new tenants.
“Rents for Times Square retail space haven’t been this low since 2012,” Lodhi told CNN Business on Wednesday. “This is an opportunity for other companies to lock in these rates.”
The company broke ground on the 46-story mixed-use facility at the corner of 47th and Broadway in northeast corner of Times Square back in March 2019. Once it’s completed, the location will be home to 75,000 square feet of new retail space, a 4,000-square-foot performance venue with an outdoor stage, a food and beverage terrace and a luxury hotel.
L&L managing director David Orowitz says the pandemic hasn’t shaken the developer’s faith in the $2.5 million project, which is still set to open at the end of 2022.
“I don’t doubt the destination location will return,” Orowitz said. “It may be at a lower price point. There will be different players, but the location itself, the nexus of human interaction and the positive benefit we as humans get from that, hasn’t been vanquished.”
Times Square’s appeal among office space tenants is also a point of contention. For years, companies like Ernst & Young, Reuters and Allianz have occupied skyscrapers overlooking the glitzy and vibrant theater district, which was frequented by nearly 380,000 pedestrians on a typical day prior to the pandemic.
Hercher said it’s an open question whether the change in demand for Times Square office space will drive down rent prices since most leases are set between five and 15 years.
“We’ve definitely seen in the residential market, rents have dropped 10-15% this year in Manhattan,” he said. “That’s probably a little bit of the canary in the coal mine.”
Lodhi, the Real Estate Board of New York SVP, acknowledged some older, less-desirable office buildings around Times Square may be converted in the near future.
“There’s talk about whether it makes sense to make those into residential usage,” he said. “The name of the game here in the Covid era is flexibility.”