As the 2015 holiday season concluded, so did the operations of one of New York’s most famous and visited retail stores. Toys ‘R’ Us closed the doors of its flagship store in Times Square on Dec. 30, 2015, after declining to renew its lease on the Broadway and 44th Street location earlier in the year.
Toys ‘R’ Us decided not to renew the space due to high rent costs, according to Elizabeth Gaerlan, Director of Corporate Communications at Toys ‘R’ Us;
The retailer is actively searching to relocate to another Manhattan flagship store; and
The retailer is seeking to find positions for those among the more than 350 employees of the store who want to keep working at Toys ‘R’ Us.
On the surface, it is surprising that Toys ‘R’ Us is closing the store. Its location in the middle of Times Square enabled millions of tourists to visit the store, or at least catch a glimpse of it, every year. With a 60-foot Ferris Wheel along with numerous life-sized toys on display, the store was a perfect fit for the family friendly attraction that Times Square developed into at the turn of the century.
However, as appropriate as the location appeared to be, Toys ‘R’ Us expects to save a healthy sum upon closing the store. Cushman & Wakefield, which leases the property, indicated that the going rate for the ground floor space that Toys ‘R’ Us occupied is set at approximately $42 million per year. Toys ‘R’ Us also occupied a lower level, a second floor and a mezzanine.
“A store that size would get a reasonable discount, but it’s still too much money for any one store to pay,” said C. Bradley Mendelson, a Vice Chairman at Cushman & Wakefield, in an interview with the New York Times. “No one can afford that much space in Times Square today.
This is the second iconic location the toy retailer has closed in New York City in 2015. Toys ‘R’ Us also closed the long-standing Fifth Avenue attraction FAO Schwarz in July, six years after acquiring the brand.
The successive closings in a short period of time could be a concern for the toy retail chain, as well as any other large retailer looking to rent space in the area. If a major retailer with an experiential offering and prime visibility can’t find it affordable to keep the store open, then who can?
While the high costs indicate that the Times Square area may be out of most retailers’ price ranges, another major brand is stepping into the former Toys ‘R’ Us space, taking a gamble that it surely hopes will pay off.
The Gap, Inc. officially signed the lease in June 2015 to take over 60% of the space once occupied by Toys ‘R’ Us. The retailer plans to house both a Gap and an Old Navy store in the space, according to a company statement.
Completion of the Gap and Old Navy stores is expected for early 2017. Each of the stores will take up approximately 31,000 square feet of space.