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Marx Realty Secures $140M Loan for 10 Grand Central Refinance

8/2/19

Loan was provided by MetLife and arranged by Cushman & Wakefield team

Marx Realty (MNPP), a New York-based owner, developer and manager of office, retail and multifamily property across the United States, announced it has secured a $140 million loan to refinance its 10 Grand Central office tower located at 155 E. 44^th St. in Manhattan’s Midtown East neighborhood.MetLife originated the loan and a Cushman team led by Steve Kohn, Adam Doneger, Mark Ehlinger, and Noble Carpenter III oversaw the assignment on behalf of Marx Realty.

“The refinancing gives us the ability to continue offering best-in-class office spaces for today’s image conscious firms,” said Deitelzweig. “Occupancy at 10 Grand Central has increased from 78 percent to 91 percent since we announced our plans last year and we continue to get incredible feedback from brokers as well as existing and potential tenants across financial, technology and business services fields.”

Marx Realty recently completed a $48 million repositioning of the 35-story Ely Jacque Kahn-designed building which included a relocated entry portal and redesigned lobby as well as a 7,500-square-foot amenity space including a lounge, conference facility and expansive outdoor terrace.

“The recent improvements to 10 Grand Central, coupled with its proximity to Grand Central Terminal, made this financing opportunity of great interest to many potential lenders,” said Steve Kohn, Vice Chairman and President of EDSF for Cushman & Wakefield.

10 Grand Central represents a new asset class within the office sector by infusing the building with a game-changing hospitality aesthetic. A complete lobby redesign gives tenants and guests a hotel-like experience beginning with its relocated and redesigned four-story entry portal and uniformed doorman welcoming tenants and guests to the building. Additionally, the 7,500 square-foot club floor is well-appointed with warm walnut wood finishes, herringbone concrete tile floors, lounge, cafe and an expansive terrace reminiscent of a 1930s era garden party, all of which represent a modern interpretation of Ely Jacques Kahn’s original Beaux Arts design aesthetic. A 40-seat conference facility rounds out the seventh-floor amenity offerings.

“Thanks to the Cushman & Wakefield team’s execution and the repositioning team’s tremendous success in seamlessly incorporating hospitality into the office product, we were able to have a host of lenders to choose from for this long-term loan,” added Deitelzweig. “We look forward to working with them again as we continue to add value throughout our portfolio.”

A number of new tenants have signed leases recently at 10 Grand Central including health tech company HLTH, international news agency Agence France-Presse, UK-based weekly magazine The Week, sports private equity firm 23 Capital, hedge fund group Macro Risk Advisors, asset management firm Everside Capital Partners, educational technology company Decoded; and private equity firm White Oak Partners. In addition, Marx Realty secured a 15,000-square-foot 10-year renewal for real estate investment firm Benenson Capital Partners and a significant expansion for advertising association powerhouse ANA.

Marx Realty Gets $140M MetLife Refi on 10 Grand Central Tower

By Mack Burke | August 1, 2019 4:40 pm

MetLife has provided Marx Realty with a $140 million loan to refinance its recently repositioned Art Deco office tower, 10 Grand Central, in Midtown, Commercial Observer can exclusively report. 

The 10-year, interest-only loan carries a rate of 3.99 percent and a loan-to-value of just 30 percent. 

A Cushman & Wakefield (C&W) team led by Steve Kohn and including Adam Doneger, Mark Ehlinger and Noble Carpenter III arranged the debt.

“The recent improvements to 10 Grand Central, coupled with its proximity to Grand Central Terminal, made this financing opportunity of great interest to many potential lenders,” Kohn, the vice chairman and president of equity, debt and structured finance for C&W, said in a statement provided to CO.

Marx set out in July last year to revamp the 35-story property with a $45 million renovation. With the redevelopment, the building’s entrance moved from Third Avenue to East 44th Street, where it fronts at 155 East 44th Street with a four-story entryway. 

The 438,000-square-foot building was built in 1931, and the company wanted to stay true to its origin, recreating an old-school, 1930s New York feel. That features a “white-gloved” doorman attending the lobby, an area that will sport circa 1920s and ’30s art. 

Marx relocated around 80,000 square feet of tenancy in order to widen the scope of the renovation as much as possible, as CO previously reported. The work included 10 prebuilt office suites, ranging from 2,500 to 8,000 square feet. 

Studios Architecture was tapped to redesign the lobby and the entrance, and it also created new amenity space and a 3,000-square-foot seventh-floor outdoor terrace. 

“What’s happened over the years [is] people changed the building and modified it in a way that wasn’t true to the original intent,” Marx Realty president and CEO Craig Deitelzweig told CO during an October tour of the building. “What we are trying to do is be authentic to his original design aesthetic but do it in a modern way.”

The redevelopment has spurred a lot of interest from prospective and existing tenants. In the last year, Marx has sealed around 160,000 square feet of leasing, Deitelzweig told CO. 

He said the company’s renovation efforts have helped push average rents up $30 per square foot from what they were charging prior to the new construction, which averaged $44. Marx is now charging $130 per square foot at the top of the building, in its penthouse collection. At the bottom of the building, rents fetch around $82 per square foot, and throughout the rest of the asset, rents in the $70s to low $80s can be had. 

The property is now 91 percent leased and Deitelzweig said that could be 94 percent by the end of this week. It houses a mix of tech, medical, financial and entertainment tenants. 

With the renovation, the chief executive said the company has opened the property to the “large universe of tenants,” meeting the needs for “an insurance company or a brand-conscious financial firm or a tech company that wants collaborative space.”  

In July 2018, the month the renovation started, Benenson Capital Partners jumped to renew its 15,000-square-foot lease, signing a 10-year deal to keep its offices on the 27th through 29th floors. 

In March, Association of National Advertisers expanded its footprint at the property to 52,000 square feet, from 41,000, on a 15-year deal, as first reported by the New York Post. 

Bringing the Amenities and Ease of Use of High-End Hotels to Other Industries

By Anthony Paletta | July 8, 2019

Companies are increasingly borrowing practices from the hospitality industry in order to attract and retain tenants and residents of all sorts. To address the topic, ULI New York convened a panel titled “The Hotelification of Real Estate,” held in June at the Shearman and Sterling offices in Manhattan, featuring a range of experts with specialties spanning commercial, residential, and mixed-use development.

Moderator Ellen Sinreich, founder and managing principal of the Manhattan–based consulting firm the Sinreich Group, said that the panelists agreed “that ‘hotelification’—in other words hospitality and amenities—are a way to differentiate their properties and improve their bottom lines.” These practices, which begin with how a company finds space, customizes it, and gains entry to it, expand to include the equivalent of room service and other services that go well beyond the traditional purview of the landlord but are routine at high-quality hotels.

Ryan Simonetti, chief executive officer of Manhattan–based Convene, which offers premium workspaces to companies and building tenants, contrasted searching for a hotel room for the night with finding space for a business, comparing the ease of using Airbnb with the complications of commercial searches. “Has anyone gone through the process of signing a lease, designing space for a building? How cumbersome is that process for the end user?” he asked.

“At Convene, in the next 90 days you can go online, find a space, design your space, buy your space, and at a click of a button your service contract is done,” he said. “Move in a week—that’s a fundamentally different way to deliver the office as an experience.” He added, “We like to think of ourselves almost like a hotel brand but for offices.”

David Barry, president of Ironstate Development Company, based in New York City and Hoboken, New Jersey, noted that people think about boutique hotels when they talk about the hotelification of real estate. “It’s what happened to [the hotel] industry 20 years ago, where the product became emotionally connected to the consumer, to the guest, as opposed to just being commoditized, sanitized, heads in beds, which is what the old brands had.”

Though some practices can be standardized more effectively in ways resembling the operations of hotels, the point is not economy of scale but differentiation through increasingly personalized service and amenities.

Craig Deitelzweig, chief executive officer of Marx Realty, a Manhattan-based real estate investment, development, and management firm, cited the monotony of the office lobby.

“If you look at a lobby 50 or 60 years ago, it looks kind of the same as a new development today,” he said. “They’re all white marble or gray marble. If they’re crazy and they’re all super bright, you almost feel like you’re going to a doctor’s office with the lighting. What we wanted to do was really change that up and make it warm and inviting and welcoming, so our buildings don’t have any white marble; we don’t have bright lights.

“We look at hotels for inspiration, and the reason for that is, really, hotels are spaces that make you feel good.” The approach is modeled on hotels in several particulars, he said. “Our buildings have doormen outside like you would see in a hotel. We have oversized doors; we have a marquee, not a canopy.”

One thing the buildings do not have is turnstiles. “We don’t believe in it,” Deitelzweig said. “We think it’s sort of governmental and not welcoming.” This places a premium on good doormen, adept at recognizing and welcoming tenants, he said. Instead of hiring doormen through security groups, his firm hires through hotels.

Marx lobbies have walnut, brushed brass, herringbone floors, and flowers and plants—and no white marble. “It goes upstairs, as well,” Deitelzweig said. “It’s holistic throughout the entire property. It’s the attention to difference that makes a difference. As a result, we’ve been able to obtain really premium rents.”

The resemblance to hotels does not stop there, he added. “We curate the food also: we have an app delivering cappuccinos and avocado toast—kind of like room service,” he said.

The key at large developments like Hudson Yards in Manhattan and Related’s Santa Clara development in Santa Clara, California, is not standardization but intense and specific attention to local circumstances, customers, tenants, and clients, said Ken Himmel, chief executive officer of Related Urban, a developer of large-scale mixed-use properties.

“At the end of the day, I think a lot of people who don’t work on these complicated mixed-use projects may think that the scale of the project, just the sheer size of it, creates an opportunity to simplify or make more money out of what you’re doing just because of the scale of it,” he said. “It’s just the opposite. It’s so much more complex; it’s incredible.

“It’s about the full breadth and depth of hospitality being integrated with the program, which covers a wide variety of program uses,” he said. “You always start with the programming. No one can begin planning or designing a project without understanding what the programming is. These programs are not very flexible.”

He noted that no two projects are the same. “That’s what I love about our business compared to what has happened with the commodity mall business where everybody had a formula,” he said. “When they got a formula, they thought they had it right, and they did 40 of them.”

Because Himmel’s mixed-use projects have frequently included hotels, it is no surprise that he has borrowed from hotel practices. The tailoring of each element to the local market is one practice adapted intensively from that industry—a process that often involves more initial effort. “For us, the most innovative part of the programming usually works around hospitality, and we differentiate hotels,” he said. “So in Santa Clara, I’ve got a 460-room Conrad convention hotel and I’ve got an Equinox hotel.” Equinox health clubs, from which the hotel chain originated, are a standard amenity in his undertakings and not coincidentally mimic gym offerings at other hotels.

“The next biggest amenity is to provide food and beverage—creative food and beverage: not just the most expensive food and beverage, but a wide variety depending on how big your project is,” he said. “There’s a direct relationship to the quality of the operator . . . and the amount of money you have to invest to do it. You cannot do triple-net leases with these guys, so most creative combinations or curations come from understanding the business. . . . Today, I spent as much time on two restaurants at Hudson yards as I did on my $9 billion project in Santa Clara. It’s a price you pay for delivering an experience at your projects that no one else will deliver.”

He noted that profits yielded from such efforts can be considerable, but that close attention to the product is required at the outset. “These are crazy, wild undertakings, and you have to staff yourself to be able to do it.”

Barry noted that standardization often can cost more than bespoke efforts, with standard amenity spaces—he cited a golf simulator as an example—frequently going unused. “I think there’s a military industrial complex that occurred between marketing people and interior designers where it’s just like, ‘Let’s put new stuff in this,’ and nobody’s really thinking about how it’s going to be used or operated.”

Customization must involve both attention to a tenant’s wishes at the outset and data-driven monitoring of what works for them, Simonetti said. Hotelification need not involve massive outlays of money, he added. “You can create a good human-to-human experience where when I show up, I get a person who greets me and says ‘Hey, how are you?’, where the property manager is kind, where I can pay my bills easily.”

One area the panelists disagreed on was the length of leases. Convene focuses on a “forgotten middle” of tenants, whose space demands are modest, Simonetti said. “If you’re an occupier under 20,000 square feet [1,900 sq m], you should never sign more than a two- or three-year lease agreement,” he said. “It’s impossible to predict where your future’s going to be.” Shorter leases have delivered higher profits, he noted. “We just had our first wave of big renewals, and our renewal rate was 98 percent, he said. “Each one of those companies committed to a longer rental, and they paid more.”

Deitelzweig outlined a different approach. “We are a little concerned about some of the short-term occupancy for office tenants,” he said. “In the hotel world when things get bad, those short-term stays are really troublesome. When it gets bad, the hotel industry is the first to feel it. Our model is not that short term; it’s to have tenants that are there for the duration so we have economic success even when the market goes south.”

One area of agreement was straightforward: revenues. All pointed to leasing and rental premiums from delivering a personalized service. “Because we’re highly amenitized, we have trophy-like rents,” Deitelzweig noted. These properties leave much more than a light on for you, and reap rewards in the process.

Marx introduces hospitality vibe at 10 Grand Central

by REW | May 8, 2019

Marx Realty just unveiled the redesigned lobby at the newly rebranded 10 Grand Central office tower. 

The company previously announced the completion of a redesigned lounge, terrace, and conference space at the building as part of the $45 million repositioning of the 35-story Ely Jacques-Kahn designed building located at 155 East 44th St. 

The repositioning represents a design disruption in the office sector with a hospitality-like appeal that includes details such as a signature scent, customizable mood music and video art installations throughout the building. 

The lobby and entry have been relocated to the building’s original 44th Street location, orienting the property towards Grand Central Terminal, as the original design intended. 

“The redesigned lobby fulfills our vision to transform the space at 10 Grand Central to an office experience unlike anything currently available in the New York City office market,” said Craig Deitelzweig, CEO of Marx Realty.

“We have translated this repositioning strategy into a wildly successful hotel-meets-office package that sets a new standard and creates a space that embraces hospitality in a meaningful way. It’s a truly special atmosphere with a highly stylized look and feel that begins right at the front doors and transitions throughout the building while paying tribute to the building’s original design aesthetic.”

The company recently delivered 7,500 s/f of seventh-floor amenity space, including a lounge connected to a terrace, and a conference facility.

According to Deitelzweig, the redesign has resulted in over 130,000 s/f of new leases.

A JLL team led by Howard Hersch, Sam Seiler, and Cynthia Wasserberger is handling the leasing effort. Asking rents range from $72-97 psf.

Lobby And Exterior Renovation Nears Completion At 10 Grand Central, Midtown East

Sebastian Morris

Commercial developer Marx Realty has returned with the first completed images of its newly branded office tower at 10 Grand Central. The $45 million project entails a redesign and repositioning of the building’s lobby to its original 44th Street location to provide more immediate access to Grand Central Terminal.

As previously reported by YIMBY, ten modernized office suites within the building will range in size from 2,500 to 8,000 square feet, in addition to a 22,000-square-foot, full-floor unit. Other components include an interior lounge, outdoor terraces, and expanded conference areas. The 35-story office tower was originally designed by architect Ely Jacques-Kahn and opened to the public in 1931. The structure features numerous setbacks and Beaux Arts details, which the updated design will partially maintain. The most prominent alteration is a four-story sculptural form designed by Studio Architecture that adorns the new entrance with glossy brass fins and black masonry.

As a final touch, uniformed doormen will be positioned at the entrance to greet tenants and their guests.

“The redesigned lobby fulfills our vision to transform the space at 10 Grand Central to an office experience unlike anything currently available in the New York City office market,” said Marx Realty’s president and CEO, Craig Deitelzweig. “We have translated this repositioning strategy into a wildly successful hotel-meets-office package that sets a new standard and creates a space that embraces hospitality in a meaningful way. It’s a truly special atmosphere with a highly stylized look and feel that begins right at the front doors and transitions throughout the building while paying tribute to the building’s original design aesthetic.”

According to the developer, scaffolding is expected to come down in the next few weeks. JLL Team is exclusive leasing agent for the office space.

Owners of Famed Chrysler Building Reach Deal to Sell Tower

New York City landmark set to be sold for about $150 million, a substantial loss for the current owners

The owners of New York City’s Chrysler Building have reached a deal to sell the iconic skyscraper for a little more than $150 million, unloading the 77-story office tower at a substantial loss, according to people familiar with the matter.

At the desk of: Craig Deitelzweig

The Marx Realty CEO on preserving the character of buildings, his favorite surfing spots and pushing for the Guggenheim to move to LIC.

By Meenal Vamburkar | June 01, 2019 01:00PM

Small Bible

This pocket Bible has been Deitelzweig’s good luck charm since high school. His grandfather, who used to carry it around with him, passed it on to Deitelzweig before he died. “If I have an important meeting, I put it in my pocket,” he said, adding that it’s gotten him through everything from SAT and LSAT exams to job interviews.

Copper eagle

Crain’s 2019 Coolest Offices in New York

By: Gerald Schifman

For the second year, Crain’s New York Business is featuring the Coolest Offices in New York. To be eligible, offices needed to have been opened, renovated or otherwise modified between Jan. 1, 2018, and March 31, 2019. Through online surveys, companies submitted descriptions and photos to demonstrate just what makes their office cool. Crain’s editorial staff combed through dozens of candidates, seeking spaces that showcase the latest trends and are built for the future of work. Fifteen winners and finalists were selected in five categories: new construction, retrofit, amenities, décor and collaborative space.

What’s next? Read how the coolest offices are getting smart.

COOLEST NEW SPACE

 

MARX REALTY

10 Grand Central // Midtown East

ARCHITECT: OTJ Architects
CONTRACTOR: Phase 3

Marx Realty also made its mark with its new digs at 10 Grand Central. The real estate management and development firm created a 1930s hotel–like feel, installing polished concrete floors, black steel–framed windows and brushed-brass fixtures. The office also has a 2,200-square-foot outdoor terrace with ample seating.

 

The Leadership Issue | Cover Story: Best Bosses in the Business

By Erika Morphy  June 03, 2019 at 09:00 AM

How easy is it to identify a “best boss” anyway? We at Real Estate Forum had the experience of finding that out as we shifted through…

How easy is it to identify a “best boss” anyway? We at Real Estate Forum had the experience of finding that out as we shifted through numerous nomination forms that contained shining examples of leadership from colleagues, employees and team members. Surprisingly, it was a hard decision to make. We say ‘surprisingly’ because statistically speaking, best bosses—or put another way, good leaders—are hard to come by. For instance, only 14% of CEOs have the leadership talent to execute on their strategy, according to one survey. The effect this lack of leadership talent has on a company and its workers cannot be overstated. According to another estimate, there is a 50% difference in the impact that a top performing leader has compared with an average performing one.

Perhaps it is different in the commercial real estate space. Perhaps the rigor needed to navigate our industry and the ease at which it is possible to fail intuitively attracts the best of the best. To borrow from a well known expression, if you can make it in CRE you can make it anywhere.

What is perhaps most astounding about the leaders you will read about in the following pages is the way they make it seem so easy. Juggling multibillion dollar books of business, implementing vision statements and strategic goals and they still always seem to know the name of even the lowliest employee in the office. Smarts, intuition, honor, skill and charisma. You can read about it over the next few pages.

The Best Boss

The Innovator: Craig Deitelzweig “It is an unbelievable privilege to work under the guidance of someone who is an innovator in the field of commercial real estate.” That is according to one colleague describing to Real Estate Forum Craig Deitelzweig, president and CEO of Marx Realty and Merchants National Properties.

Marx Realty is a division of Merchants National Properties. Founded in 1915, its current portfolio of properties includes over 4.7 million square feet of commercial office, retail and residential space as well as five mixed-use projects currently under development. Marx Realty is vertically integrated and involved in all phases of real estate management, development, construction and leasing. The company’s assets comprise 68 properties in 17 states across the continental US.

According to the colleague, “It’s leaders who push the envelope and set new standards for the spaces in which we live, work and play that inspires young professionals to do the same. This, in turn, is what changes the game for the industry as a whole and leads to tangible success in CRE.”

When talking about Deitelzweig, the colleague says that while every firm endeavors to stay relevant in commercial real estate, only a few rise to the top. “I have worked closely with Craig on several high-profile projects in two of the most important office markets: New York and Washington, DC. Office tenants in these markets—and indeed across the country—office and retail tenants are seeking spaces that are more than just a place to do business. They want to be in a place that is an extension of their brand, where they and their employees can ‘see and be seen.’ While there are many ways to accomplish that goal, Craig has a knack for raising the bar via forward-thinking design and I can’t say enough about what that has taught me as I move through my career in commercial real estate.”

One particular thing the colleague learned from Deitelzweig was the importance of being thoughtful and purposeful. In one particular project they worked on together, for example, the colleague said that Deitelzweig didn’t seek to just add amenities for the sake of adding amenities but instead, he transformed this property into a trophy asset.

The Flagship Is Sinking: Why Retailers Are Closing More Of Their Priciest Stores

June 3, 2019 – Miriam Hall, Bisnow New York

Flagships have long been considered a key part of any retail brand — and the type of offering considered well-equipped to survive the e-commerce blitz. But a series of major closures this year has many grappling with how these costly flagship stores should be reshaped for retail’s new world order.

On Wednesday, Abercrombie & Fitch became the latest company to step back from flagships, announcing it would close three more locations around the world, including the Hollister store in SoHo, joining a slew of retailers that have moved to close high-profile flagship locations this year.

These costly flagships and their nose-bleed rents have long been considered worth the cost because of their marketing impact. But sources say fundamental changes in consumer behavior, and soaring leases in prime retail strips has meant many retailers have found the benefits may no longer justify the cost. And while industry players say flagships aren’t dead yet, many will have to be readjusted to cut it with the modern shopper — who increasingly looks to well-filtered Instagram pictures over a well-designed store for inspiration.

“There’s a significant role for flagships in the overall retail scheme,” CBRE Vice Chairman Richard Hodos said. “But it has it has to be interactive, exciting and right on point … [it] can’t just be bigger version of the mall stall.”

Hodos’ deals include Ralph Lauren’s flagship store at 711 Fifth Ave., which shut amid declining sales in 2017, as well as Victoria’s Secret and Microsoft’s flagship leases on the same strip.

“The word ‘flagship’ gets thrown around like an old doormat … the real meaning of flagship is one and only,” he said.

He believes most new flagship leases in the country’s most expensive locations will need to include some form of “release valve” for the tenant if sales don’t match up to expectations.

“Landlords are going to have to adjust … retailers can’t afford to make long-term mistakes,” he said.

In some cases, the pullback from flagships represents retailers’ attempts to create smaller offerings for shoppers.

“What we’ve learned from the consumer is they are really enjoying the smaller spaces,” Ambercrombie & Fitch CEO Fran Horowitz told CNBC last week.

“There is a more intimate feel to it. … And the customer likes that one-on-one interaction,” Horowitz said.

Along with its SoHo Hollister flagship, the company announced that it is closing its Abercrombie & Fitch flagship in Milan, Italy, and Fukuoka, Japan. It had already decided to close flagships in Copenhagen and Hong Kong. After the announcement, shares in the company fell by 26% on Wednesday, according to the Wall Street Journal.

Tommy Hilfiger on Fifth Avenue

In March, Tommy Hilfiger closed its global flagship at 681 Fifth Ave., with Daniel Grieder, the CEO of Tommy Hilfiger Global and PVH Europe, saying the move was part of the company’s move to reshape the retail landscape in North America.

In January, Calvin Klein moved to close its Madison Avenue flagship, following a major redesign of the store just two years ago. Lord & Taylor’s famed building on Fifth Avenue is now owned by WeWork.

Versace put its Fifth Avenue space on the sublease market back in December, and the owners of Macy’s are said to be considering building an office tower atop the iconic flagship Manhattan store on 34th Street in an attempt to squeeze out more profit from the site.

Foot Locker has introduced its Power Store concept in North America

“As margins have come down and profits have been squeezed across retail over the last decade, it’s been harder to justify using a box simply as a marketing tool,” said Simeon Siegel, a retail analyst at Nomura Securities.

“For that reason you’ve seen a lot of retailers rethink their flagship strategies.”

He said that, across the board, retailers have been closing brick-and-mortar locations en masse, a trend that is only expected to worsen this year.

This earnings season has been woeful for retailers — last week shares of several major mall-based companies tanked thanks to poor earnings and the threat of tariffs — dimming hopes of a “retail renaissance” that was sparked by some strong numbers posted last year.

“When these big brands start to close down flagships … it really begs the question of what else what might be going on,” said Mark Ryski, the founder and CEO of Headcount Corp., a retail analytics company. “The advantages of having a flagship … is to really put forward to your best offering, your best service experience.”

He believes flagship closures should be considered on a case-by-case basis — though there is no doubt retailers should now be asking themselves the exact purpose of their flagship, and how they can experiment to make it exciting to a consumer.

Marx Realty President and CEO Craig Deitelzweig said “experiential and cheaper” is now the name of the game, and that he expects to see greater numbers of flagships, or flagship-style stores in suburban or lower-cost areas. He pointed to his company’s lease with Foot Locker at 605 West 181st St. in upper Manhattan — where the retailer is opening one of its experiential “power stores” that will feature a barbershop and event space — and retail leases in cheaper locations outside of urban areas as a true indication of a safer retail bet.

“[In places like Yonkers] the rents are good but not anywhere near the rent for Fifth Avenue,” Deitelzweig said. “They can offer all those elements that today’s customer wants in terms of making it really special.”

Still, retailers pointed to several flagship success stories in the city. Apple Stores routinely perform well, and Nike’s flagship on Fifth Avenue is said to have lines out the door. Whether or not these stores are generating sales to justify the costs is unknown.

“People just don’t have time or energy to go through these [large-scale] stores anymore,” Lee & Associates Executive Managing Director and principal Greg Tannor said. “But if you have the right store in the right location selling the right products people are going to come.”

JLL’s Americas Director of Retail Research James Cook said many retailers are adding flagship elements and concepts into their stores.

“It almost seems like there’s less of a need for one big flagship if you can have more cutting-edge stores with smaller footprints set out across the U.S.,” he said.

The FAO Schwarz flagship, which is now in 30 Rockefeller after leaving its famed location of Fifth Avenue, speaks to that trend, he said.

The store still incorporates many of the experiential elements of the Fifth Avenue location, but has a smaller space. He said buyers are looking for value, as well as experience, which may mean fewer luxury flagships and some types of apparel stores — but flagships will always have some place in the retail landscape.

“This concept of a flagship is being the home base or the heart of the brand. And it’s kind of like the center of brand building — that’s not going away,” he said. “It’s just changing.”