Tenant Mix Key to Success of Outlet Center on Staten Island Waterfront

Outlet centers have been inching closer and closer to urban cores in recent years, and the upcoming Harbor Commons center in Staten Island, N.Y. exemplifies the trend. Located on the waterfront, steps away from the St. George Ferry Terminal and next to the planned 625-foot Ferris Wheel, the tallest in the world, the project has the potential to become a huge success if it’s handled right, according to real estate sources familiar with New York City’s retail scene.

“This is a whole different concept for outlets—it will be in the middle of the population. Should it work? Yes, it should. It has the waterfront, it has the views, it has people. It could be spectacular,” says Gerard Mason, New York-based executive managing director with real estate services provider Savills.

Conceived by BFC Partners, a Brooklyn, N.Y.-based development firm, the $230 million project will combine 350,000 sq. ft. of outlet stores with a 200-room hotel and a structured parking garage for more than 1,200 cars. The site, which BFC will be leasing from the City of New York for a 99-year term, should provide the center with a steady stream of potential shoppers, including tourists taking the Staten Island Ferry, New York City commuters and Staten Island residents.

Ever year, more than 20 million people ride the free ferry from Whitehall Street in downtown Manhattan to St. George Ferry Terminal. The service, available 24/7, runs about every 15 minutes during rush hours, every half an hour during regular daytime hours and every hour at night. Passengers are not allowed to stay on the ferry for a roundtrip, however—they have to get off at St. George and wait to re-board the ferry back, creating a captive audience, according to Lisa Wagner, principal with EWB Development, which is serving as a consultant on Harbor Commons along with Casandra Properties Inc., a Staten Island-based leasing and property management firm.

“I think so many more visitors will come now because the outlets are right there, with the [added benefit] of the visuals of Manhattan and with this observation wheel,” Wagner says. “We feel that Staten Island is a great place to put an outlet center anyway, obviously the people there are going to use this, but think of the people who are visiting and living in Manhattan and the other boroughs who can jump on the ferry or on the water taxi, have a beautiful trip and an outlet experience. It’s a trifecta.”

Harbor Commons, in fact, will be very similar in concept to outlet centers developed by the Mills Corp., now a division of Simon Property Group, whose properties combined outlet shops with entertainment venues, according to Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York City-based retail consulting and investment banking firm. Nationally, opportunities to build such projects are limited because they require a lot of space and a substantial tourist base, but the Staten Island site happens to fit the necessary parameters perfectly. It also helps that real estate costs in Staten Island are cheaper than elsewhere in the city, adds Jeff Green, president of Jeff Green Partners, a Phoenix-based retail real estate consulting firm.

“Given the fact that real estate is so expensive in urban areas I doubt that urban outlet centers will be a new phenomenon,” he notes. “That being said, the population of Staten Island is such that I believe outlet retail be quite successful” there.

Filling out the details

The main challenge for the developers, according to Mason and Richard Hauer, a New York-based executive with a long history in the outlet center space, will be getting the tenant mix just right. Wagner says the phone has been ringing off the hook with retailers interested in seeing the site plans, and she expects that the tenant mix will be geared heavily toward the preferences of international tourists, which means it will be upscale and focus mainly on American brands. (More details will be released during the project’s “official launch” at New York ICSC conference in December, according to James Prendamano, broker associate with Casandra Properties).

But Staten Island is not a place where an outlet center can be successful with just the regular mix of tenants such as Gap and Nike, notes Mason.

To attract the interest of both tourists and local residents, who have multiple shopping options, it will need strong department store-like anchors along the lines of Saks Fifth Avenue Off 5th and Neiman Marcus Last Call. Brands like Brooks Brothers and Coach can also serve as traffic draws.

Another potential obstacle that has to be handled with skill is the fact that Harbor Commons will be a multi-level development rather than a single-story one, as most existing outlet centers are, says Mason. Shoppers are often reluctant to go up in order to visit more stores; as a result, sales for tenants on the upper floors tend to be lower. If BFC and its partners opt to use those levels for restaurants and entertainment venues, however, they may give people enough incentive to get into the elevators or climb the stairs.

“As a concept, I like it a lot,” Mason notes. “We’ll have to see how the tenants feel about it.”

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