December 15, 2001

Toy Store Is Leading Retail Shuffle in Times Square

By CHARLES V. BAGLI

Mickey Mouse and other Disney characters will not be coming back to the giant retail store at Seventh Avenue and 42nd Street that was a fixture in the resurgence of Times Square. Cosmetics Plus quietly closed its doors on 42nd Street and Planet Hollywood, with its flagship theme restaurant now in Times Square, slipped back into bankruptcy court in October.

But shoppers are clogging the aisles at the newly opened Toys "R" Us on Broadway at 44th Street. McDonald's is opening a highly theatrical hamburger stand on 42nd Street. And Adidas wants to break into the center of Times Square, as does 7- Eleven.

The comings and goings are all part of the retail shuffle in Times Square. Five years after a bustling transformation of Times Square and 42nd Street began, retailers, restaurants, game rooms, movie houses and record stores are still trying to figure outwhat works and where.

The neighborhood was hurt by the slowing economy and a reduction in the number of international tourists after Sept. 11. Sales were off by as much as 40 percent, analysts said. But the crowds have swelled again at what promoters like to call the crossroads of the world.

"We still think it's a very strong retail market on a long-term basis," said William Rudin, a developer whose family-owned company built the Reuters Building, on Seventh Avenue between 42nd and 43rd Streets. "You've got millions and millions of people annually going through this area," he said. "It's still a magnet for national and international retailers."

Disney closed its store on 42nd Street two years ago when the building was demolished to make way for a new office tower, the Ernst & Young Building. But it only recently decided not to reopen its store in the new building. The now-vacant corner is drawing a lot of interest from retailers, brokers said, given the opening of Toys "R" Us in November, which appears to be a success even though it has been open only for a short time.

"It's a great space for retail because of the volume of people who walk by," said C. Bradley Mendelson, the real estate broker with Insignia/ESG who is leasing the space and closed the deal. "People have questioned whether all those people are shoppers," he said. "I think the answer is yes."

Not all locations are created equal, however. It is far better to be in a store or restaurant in the heart of Times Square, where Seventh Avenue crosses Broadway, than to be farther west, on 42nd Street, retailers and brokers say.

The Virgin music superstore in the Bertelsmann Building on Broadway, between 45th and 46th Streets, has been doing a solid business since it opened in the mid-1990's. But, brokers said, the HMV music store on 42nd Street near Eighth Avenue is limping along, because there is not as much pedestrian traffic.

"The real estate in the heart of Times Square is primo," said Richard Hodos, president of HGCD Retail Services. "But business really drops off as you head west from Seventh Avenue."

Still, if there are fewer tourists in and around Times Square, there are more corporate workers. Reuters moved into their tower earlier this year. Next year, Ernst & Young will move thousands of employees into its new skyscraper. Lehman Brothers is moving to the north end of Times Square, while Condé Nast has been on the east side of Broadway between 42nd and 43rd Street for a couple of years.

The influx of office workers is prompting a change in the retail mix. The theme restaurants and game rooms that characterized the early transformation of Times Square are giving way to more traditional retailers. Duane Reade and JP Morgan Chase, for instance, are taking prime corners for new outlets, the former in the Condé Nast Building and the latter in the Reuters Building.

"There is such a density of office workers there in the mornings and afternoons and at the lunch hour," Mr. Hodos said, "that you almost don't need the tourists." But no retailer wants to forgo the tourists. After all, the tens of millions of visitors who stream through Times Square are the main reason that landlords are able to charge high rents.

Adidas, the Times Square Brewery and 7-Eleven are all circling 1 Times Square. Warner Brothers closed its studio store there this year. Steven B. Schwartz, a chairman of Retail Realty LLC, which represents 7-Eleven, said: "7-Eleven is known as a 24-hour operation, as is Times Square. I think it's a perfect match."

Not everyone welcomed 7-Eleven. The Rudins turned the company down.

Irwin Kruger, a McDonald's franchisee with six stores in Midtown, said that in March he plans to open one of the largest hamburger stands in the country at the Candler Building, a 24-story white terra cotta tower on 42nd Street to the west of the New Amsterdam Theater.

But, Mr. Kruger said, it would not be any ordinary McDonald's. He hired the architectural firm of Beyer Blinder Belle to design a two-story restaurant that will use exposed brick, rebar handrails, vintage photographs and klieg lights to give patrons a sense of going backstage at a Broadway theater.