May 01, 2017
By Rich Bockmann
From its post-World War II heyday as a department store hub that Abraham & Straus, Namm & Sons and Martin’s called home to its mix of low- and high-end stores today, the Fulton Mall is changing on a scale not seen in decades. The street’s once-drab eastern end is seeing a flurry of new residents due to several major developments in the surrounding area.
One of the biggest new additions is the 1.8 million-square-foot City Point complex, which will soon house a Trader Joe’s, among other stores and food hubs. Those retailers will add to the contrast of shops that already exist. Shake Shack, Brooklyn Industries and Swarovski stand side by side with Fulton’s old guard: Jimmy Jazz, Dr. Jay’s and the Rainbow Shops, among other discount retailers and an array of pawnshops and beauty supply stores.
Average asking rents have climbed to $326 per square foot, surpassing Williamsburg’s trendy Bedford Avenue as the priciest corridor in the borough, according to a recent retail report from the Real Estate Board of New York. Higher rents and changes in co-tenancy raise the question: Will new retailers alter the character of Fulton Street, leaving the area’s traditional discount stores in the dust?
“There’s a whole wave of new tenants, which reflects the broadening of the Fulton Street market,” said Paul Travis of Washington Square Partners, which developed City Point with Acadia Realty Trust. “It’s beginning to catch up with the changes that have been occurring in the neighborhood and around the street.”
Indeed, the recent influx of national chain stores to the Fulton Mall is tied to the booming office and residential activity from new towers rising on the Downtown Brooklyn skyline.
“I think the cycle’s not going to happen overnight, but [traditional retailers] may or may not want to stay based on increasing rents and the expanding customer base,” said Lansco Corp.’s Robin Abrams, who sits on REBNY’s Brooklyn retail-report advisory group.
And that transformation will only continue. JDS Development Group and the Chetrit Group are building a 1,066-foot-tall rental building at 9 DeKalb Avenue, next to the iconic Junior’s Restaurant. And Tishman Speyer is bringing 620,000 square feet of office space above Macy’s at 422 Fulton Street.
Those developments are changing Downtown Brooklyn into more of a “24/7 neighborhood” — a stark difference from the largely office population that the area used to house, according to RKF Vice Chairman Barry Fishbach. “Office workers would go shopping during lunch and then typically at the end of the day would get in their cars and go home,” he said.
And while the old stores on Fulton Mall usually start to roll up their gates by 7 p.m., the newer shops at City Point stay open later, and Target doesn’t close its doors until midnight.
“If you take a walk on Fulton Street today, the difference from two to three years ago is exponential,” said Cushman & Wakefield’s Diana Boutross. “The customer base is changing. It’s no longer a 99-cent-store customer. It’s Gap. It’s Banana Republic. The rents have changed so much. Some of the discount tenants will eventually have to move out as the new retailers start filling in on the block.”
Xios, a young men’s discount fashion shop with about two dozen locations in New York and New Jersey, for example, closed down at the northwest corner of Duffield Street and Fulton more than three years ago before Thor Equities bought the building, at 519 Fulton, in 2014 for $12.7 million.
“It’s harder for a local tenant to pay the premium rents that a corner typically gets,” said Fishbach, who is not involved in the property. Thor is currently marketing the space, which has about 2,200 square feet on the ground floor.
A short walk west — on a block home to Ann Taylor Loft, Duane Reade and the Gap Factory Store — a pawnshop and jewelry store has operated out of a 20-foot-wide storefront at 453 Fulton for about 20 years, but it looks like its days may be numbered.
The owner, local landlord Fasiha Sheikh, is looking to attract a national tenant to the space, which has 1,400 square feet on the ground floor.
“We had some interest from nationals, mostly food chains,” said Samuel Mizrahi of Century 21 Mizrahi Realty, who is marketing the space. “The taxes are just so high on the street. It’s a tough nut for a local tenant.”
But other market insiders said that the changing face of retail on Fulton doesn’t necessarily spell the end of the area’s traditional stores. The strip still serves shoppers from the immediate area — including the public-housing complexes Gowanus, Ingersoll and Walt Whitman. And new entrants including the Banana Republic Factory Store and Nordstrom Rack fit the street’s traditional profile of discount retailers.
“Of course, for every new tenant that came in, an old one left,” said Ryan Condren, managing director of CPEX Real Estate’s Brooklyn retail group. “But I think if a store has the right business model, it will be fine.”
Stores on Fulton Mall average around $1,200 per square foot in sales, and stalwarts like the discount department store Cookie’s do business at a good clip, reaching up to $1,400 per square foot, according to SCG Retail broker Geoff Bailey.
“That’s on par with some of the top-grossing shopping centers in the country,” he said.
Even at City Point, retailers are trying to figure out the Fulton Mall’s formula. Armani Exchange, which was the project’s first tenant in 2012, closed its 6,500-foot store in 2015.
“They entered the market very early and did not reopen, which seemed to indicate that it was not ready for them,” Boutross said.
While the face of Fulton continues to transform, some say the core demographic that made it such a longtime success remains.
“I was concerned that as the character of the Fulton Mall changed, we might be essentially just swapping one demographic for another,” said Robert Perris, district manager of Downtown Brooklyn’s Community Board 2.
“However, it seems to me that the traditional, hip urban black shopper who kept the Fulton Mall alive for decades, I see them in stores like Aeropostale,” he added. “It doesn’t seem like we have pushed one demographic out for another.”
A look at the slew of developments popping up along Fulton Street
1. City Point
City Point — the first large-scale development Fulton Mall has seen in decades, and the biggest, kicks off the transformation of Albee Square Plaza at the eastern end of Fulton Street.
The $1 billion, 1.8-million-square-foot mixed-use development includes 675,000 square feet of retail, 1,148 apartments and 30,000 square feet of office space.
Century 21, Target, the Alamo Drafthouse movie theater and Danish retailer Flying Tiger Copenhagen are now open, with Trader Joe’s and DeKalb Market Hall among those coming later this year. Brodsky Organization’s 440-unit City Tower at 10 City Point opened in 2015 and the 250-unit 7 DeKalb Avenue rental tower, co-developed by BFC Partners, opened early last year. As part of the megadevelopment, Gary Barnett’s Extell Development is also constructing a 59-story tower at 138 Willoughby Street. The building, which will house either condominiums or co-ops, is slated for completion in 2020.
Plans for City Point emerged after Downtown Brooklyn’s 2004 rezoning, when Washington Square Partners and Acadia signed a long-term ground lease with the city for the site. BFC and Brodsky were named partners in the project in 2012, and Barnett acquired the last site at the project for $120 million in 2015.
2. 9 Dekalb Avenue
Chetrit Group and JDS Development Group
Set to rise 1,066 square feet over Albee Square, JDS Development Group and the Chetrit Group’s 73-story rental tower is primed to be the tallest in Brooklyn.
JDS and Chetrit purchased the Dime Savings Bank at 9 DeKalb Avenue as well as the property’s air rights for $90 million in late 2015. The developers plan on repositioning the landmarked bank into a 30,000-square-foot store. The 500-unit residential tower will have 110,000 square feet of additional retail and will be connected to the old bank with a glassy atrium designed by SHoP Architects.
The developers have yet to sign any retail tenants. Those familiar with the space said its unique design — a landmarked interior and lack of a glassy storefront — won’t appeal to everyone, but will to a certain type of retailer looking to make a statement.
“There are only so many tenants out in the market that are looking for that type of product,” said Ryan Condren, managing director of the retail group at CPEX Real Estate, who added that the bank’s idiosyncratic design will mean that the developers will be marketing it to a smaller pool of potential tenants.
3. Fulton assemblage
One of Fulton Street’s most buzzed-about projects is also one of its most secretive.
Williamsburg-based RedSky Capital has spent more than $104 million over the last four years assembling a nearly full-block site between DeKalb Avenue, Fulton Street and Flatbush Avenue Extension facing the eastern end of Albee Square.
While RedSky has been tight-lipped about its intentions for the site and has yet to file plans with the Department of Buildings, it refinanced the property with a $127 million loan from Apollo Commercial Real Estate in April.
The area — which currently houses a collection of low-slung retail buildings — is zoned for more than 500,000 square feet of residential and commercial development. SCG Retail broker Geoff Bailey said it’s likely that the developers will follow their peers and build something that mirrors the other projects on Albee Square.
“I’m sure it’s going to be a big, tall building with a nice retail podium,” he said. “It could very much be a flagship location.”
4. The Wheeler
Macy’s is getting an upstairs neighbor, thanks to Tishman Speyer.
The department store chain sold the top five floors of its nine-story Fulton Street store to the developer for $270 million in December 2015. Last month, Tishman Speyer unveiled its plans for the Wheeler — named after architect Andrew Wheeler, who in the 1870s designed the four-story cast-iron structure that currently makes up part of Macy’s store.
Tishman Speyer is constructing 10 floors of office space spanning 620,000 square feet above and alongside the four floors that Macy’s is retaining (the retailer is using $100 million of the proceeds from the sale to renovate the lower portion of the building). The Wheeler is slated for occupancy in mid-2019; each floor will have 16-foot ceilings and open spaces in hopes of attracting Brooklyn’s creative-office tenants.
“That’s the first office space on Fulton Street ever,” said Washington Square Partners founder Paul Travis, who noted that the addition of creative-office types directly on Fulton Street will be a game changer for retailers and property owners. “We haven’t seen anything like that.”