World Trade Center Retail Tries to Find Its Footing

By Keiko Morris Features Dow Jones Newswires

As its first-year anniversary approaches, the $1.4 billion World Trade Center, hailed as a milestone in lower Manhattan's recovery from the 2001 terrorist attacks, is still a work in progress.

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The shopping component, Westfield World Trade Center, debuted its first phase of shops in the soaring, white transit hub last Aug. 16 to the promise of immense pedestrian traffic from tourists and the thousands of office workers in the mixed-use complex. But the project has faced hefty challenges amid a choppy retail environment as the retail landlord, Westfield Corp., tries to operate a mall in a site still under construction.

So far the results have been mixed. While most of the space that can be occupied is open, a handful of retailers have closed their doors or delayed openings. In addition, Westfield still has at least a year wait for a portion of prime space that has been leased.

"It's not a traditional mall or a traditional transit hub or a traditional memorial," said Greg Portell, the lead partner in the retail practice of A.T. Kearney, a global strategy and management consulting firm. "It's also not a project you'd expect to be perfect out of the gate."

The number of shops open at Westfield World Trade Center has risen to 82 from about 60 at its outset, according to Westfield. The company has continued to tweak its strategies as it tried to convert the anticipated surge of tourists and office workers streaming into the World Trade Center campus each day into sales for its retailers.

"I think the objective and main key is working on the conversion rates so they [retailers] can convert that traffic into sales," said William Hecht, chief operating officer of Westfield's U.S. operations. "We're very pleased with it and also pleased with the additional benefits and attractions we are adding to it."

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But Westfield has encountered its share of hurdles. The center suffered from a few instances of water leaks because of drainage issues and construction. Entrances to various subway stations are still being built and 3 World Trade Center, where the bulk of the project's food and dining venues will be located, also is under construction.

The shopping center's western end is interrupted by about 25,000 square feet of leased retail space that isn't expected to be handed over to Westfield by the Port Authority of New York and New Jersey until the end of 2018. The Port Authority is rebuilding what had been a temporary entrance to the PATH train station.

Because the area -- about nine store fronts on two levels now covered over -- is situated near the entrance and exit to PATH, it is considered prime retail space.

A handful of retailers also have closed or decided to pull out of the project. Retailer Kit and Ace abruptly closed its store in the center earlier this year, announcing it was closing shops in the U.S., Australia and U.K. to focus on Canada and its e-commerce platform.

Another notable vacancy is a corner storefront also near the PATH train hall that was to be taken by fashion retailer Michael Kors Holdings Ltd., which announced it would close 100 to 125 full-price stores over the next two years. Westfield said it is negotiating with Michael Kors to take back the space.

"It's not unusual to have a small percentage to not go forward on a continuing basis either because the location is not working or the parent company may have struggles or issues," Mr. Hecht said. "It's not unusual to have that level of change at all."

Westfield has made some important strides. It has incorporated a weekly farmers market, as well as movie nights and an early morning dance gathering, into its retail mix. The shopping center provides a concierge service that includes making dinner reservations or securing tickets to a show, the company said.

Westfield also is planning to roll out a delivery service for food and other items to office workers in the World Trade Centers towers and the surrounding area. Westfield is shouldering the delivery logistics for retailers aiming to ease some of the delivery hassles raised by the towers' heightened security and provide a seamless way of shopping.

As the center continues to find its footing, Westfield has the task of striking a delicate balance to avoid skewing its focus too much on one type of customer, Mr. Portell said. That will require a level of agility not required from other types of retail properties, he said.

"I give them a bit of a pass," Mr. Portell said. "Nobody else has opened in a location as complicated as this."

Write to Keiko Morris at Keiko.Morris@wsj.com

(END) Dow Jones Newswires

August 05, 2017 08:14 ET (12:14 GMT)