- Macy’s is considering adding an 800-foot skyscraper on top of its iconic Herald Square flagship store, Bloomberg reported.
- Macy’s previously said it was looking for ways to redevelop the the historic property.
- Other retail companies have been closing New York flagship stores as the underlying economic model of retail continues to shift.
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Macy’s is looking for a different kind of vertical integration.
The department store is in talks to add an 800-foot skyscraper on top of its iconic Herald Square store, according to a new report from Bloomberg.
If built, the proposed structure would bring 6,000 new people to the area. Whether they would be the structure’s residents, hotel guests, or office workers is unclear.
A spokesman for Gale Brewer, Manhattan’s borough president, confirmed the plans to Bloomberg.
“Such a major addition of square footage to the area will require major public improvements to the streets and sidewalks that surround the Herald Square neighborhood, and I look forward to Macy’s contributions to ensure that this part of Midtown and the Garment Center sees relief,” Brewer said in a statement.
As it currently sits, the Herald Square building’s value was pegged at $3-4 billion in 2015, according to the Wall Street Journal. It has about 1.1 million square feet in floor space for retail and 1.1 million square feet for office and storage space. It’s also land-marked on the National Register of Historic Places.
Investors have been pressuring Macy’s to derive more value from its real-estate holdings, of which the flagship is the most valuable part, for years.
“There is clearly impressive potential,” James Sullivan, then a senior real-estate analyst at Cowen, told the Journal in 2015. Sullivan is currently a managing director and REIT analyst at BTIG. “That is the path to the highest value creation for the Herald Square store.”
Macy’s has been considering plans for its Herald Square property for years. In February 2017, then-CEO Karen Hoguet told analysts on an earnings call that the company was “continuing to work on opportunities to create value at Herald Square.”
Hints that Macy’s would also develop the property have also been swirling since 2015. Those plans have morphed over the years to include discussions of a tower, hotel, or garden-filled roof deck complete with restaurants.
“Over the last year and a half, we have been working closely with a team of land-use, development, and design experts to produce a menu of economically viable redevelopment alternatives,” CEO Jeff Gennette told investors in a conference call in February. “These could densify the real estate with complementary uses and will certainly preserve the store and enhance the customer experience.”
Macy’s did not immediately respond to Business Insider’s request for comment.
Flagship stores in New York are under pressure as retailers’ profits shrink and real estate costs soar.
“Many brands no longer find that having hundreds of thousands of square feet, in high-rent districts, is the best impression they can give customers of their brand,” Maya Mikhailov, chief marketing officer and cofounder of GPShopper, told Business Insider’s Mary Hanbury. “Today online and mobile shopping is so much more accessible, consumers easily have the majority of brand products available at the tap of a screen.”