(NEW YORK, NEW YORK)— After its glitzy grand opening at Hudson Yards just last year, Neiman Marcus has recently declared bankruptcy and announced that it will close the location, Bloomberg News reports. The news comes as an ugly shock to the local retail landscape and Hudson Yards’ main developer, Related Companies, helmed by billionaire Trump supporter Stephen Ross.
Neiman Marcus was meant to be the anchor retail business drawing customers to The Shops at Hudson Yards. Its closure means bad news for the other 70-odd businesses relying on the foot traffic that Neiman Marcus could generate.
Even pre-COVID there were doubts whether Neiman Marcus could succeed in the crowded NYC luxury market while also facing an ever-growing threat from online retail. At the time, retail experts claimed that they felt there was still a sizeable customer base seeking a physical shopping experience. Now, a representative for the business admitted to the Real Deal that the impacts of COVID-19 had changed their calculations. Industry experts are estimating that COVID-19 will only cement a long-germinating consumer trend favoring online shopping and change retail “forever.”
Developers rushed to re-market the empty space as a an attractive office space, perhaps to Facebook, which already rents about 1.5 million square feet in the Hudson Yards complex. Yet office space is traditionally less lucrative than retail space. The developers may feel the cost difference, especially if other retail businesses follow suit. The mall-model may vanish rapidly in the American landscape, including at Hudson Yards.
It is also harder for a commercial business to succeed in a complex dominated by offices; the Shops at Hudson Yards is already on track to be less than half retail space. Neiman Marcus even cited the unfavorable distribution in the building, with more office and restaurant tenants than commercial retail, as one of the motivating factors in its decision to leave. What will other businesses decide to do when the time comes for them to renew their leases? With all retail struggling right now, other major chains with leases at Hudson Yards including Brooks Brothers, Muji, and J.Crew-owned Madewell have also filed for bankruptcy. None have yet announced if they plan to stay at the location or if they too will try to exit.
The closure of Neiman Marcus is only the latest of many foreboding signs for commercial real estate in New York. If fallout from COVID-19 drives more retailers to follow suit declaring bankruptcy and withdrawing from leases early, at Hudson Yards or across the city, it will certainly mean a massive restructuring of city life and a re-assessment for the developers with big stakes in commercial real estate of all kinds.