Let's go shopping at Ground Zero.
While all eyes will be focused on the new design for the Freedom Tower, expected to be unveiled Wednesday, World Trade Center planners are looking beyond that troubled building and are laying plans for what they consider a key part of the site -- a big shopping complex.
Officials say a mall-size collection of stores and restaurants will be immensely popular and profitable and will help fill the massive amount of office space that is slated to be built above it. "We see ground-level retail as an absolutely critical component of redeveloping the site," says John Cahill, Ground Zero's rebuilding czar whose official title is chief of staff to New York Gov. George E. Pataki.
The straight talk on retail reflects a shift in strategy. While emphasizing that the memorial to the victims of the attack is the first priority, public officials now openly acknowledge that the most viable and market-driven development that can take place there is a mall, not office towers.
Anthony R. Coscia, chairman of the Port Authority of New York and New Jersey, which owns the World Trade Center site and the retail-development rights there, agrees with Mr. Cahill. "Retail will have an enormous impact long term on the site," says Mr. Coscia, who was appointed by New Jersey's governor. "It's more likely you create an office experience that attracts tenants with a strong retail base."
But like most things at Ground Zero, where a temporary commuter rail station has been the only sign of physical progress, major obstacles remain. Larry A. Silverstein, who owns the rights to develop the office buildings on the World Trade Center site is unlikely to easily give up lucrative street-level lobby space in his towers for the likes of the Gap and J. Crew.
Public attention has recently been focused on Freedom Tower foibles. Wednesday morning, a revised plan for the skyscraper will be unveiled to replace one that was scrapped in May, when police said the tower would be vulnerable to truck bombs. The new design will have a bulky base to boost security and a facade that is reminiscent of the original Twin Towers, people familiar with the design say. Meantime, family members of those who died in the 2001 attacks on the towers will be protesting in Washington over their dissatisfaction with the memorial and a nearby cultural building.
Behind closed doors, the site's power brokers have actively pursued plans to transform Ground Zero into Destination No. 1 for shoppers. The Port Authority board met recently and directed its staff to move forward on the retail plans. The board meets again Thursday, and insiders say it will begin the process of selling the retail-development rights to a private bidder within six months.
Retail planning is far along -- at least on the drawing board. The Port Authority hired Jones Lang LaSalle Inc., a real-estate company with extensive retail experience to guide the process. Callison Architecture, a Seattle firm known for ambitious urban retail projects has created several options for squeezing 600,000 square feet of retail space throughout the site, mostly on underground concourses, train-station mezzanines, and in the base of the planned office buildings and hotel. Most of the shopping would be situated on the east side of the 16-acre site, across Greenwich Street from the footprints of the old towers, where the memorial and Freedom Tower will be.
The area's demographics are a shopkeeper's dream. According to a study by the Downtown Alliance, a business group, there are 323,000 workers within walking distance, and the average annual private-sector salary is $120,000. Flocks of well-paid professionals are occupying apartments converted from obsolete office skyscrapers. The downtown population is expected to grow by 21 percent to 40,000 in 2007, and the current median household income is $153,000.
Then there are the sightseers. The Lower Manhattan Development Corp., a city-state agency guiding the rebuilding, estimates that five million visitors a year will stream to the World Trade Center memorial. Brookfield Properties Corp. is considering tapping into the retail demand by reconfiguring space in the World Financial Center, across the street from Ground Zero.
The optimism for retail goes back to the days just before Sept. 11. The old World Trade Center mall, a concourse of stores and restaurants beneath the center, was among the most lucrative retail shopping spaces in the world. The approximately 75 stores, mostly national chains such as Victoria's Secret, J. Crew and Banana Republic, grossed $900 a square foot, making it one of the highest-grossing malls in the country.
To get the new mall started, officials will have to decide whether to build temporary retail buildings that would be knocked down when there is demand for office space. Another option is to build permanent "pedestals," with enough underground structure to support office buildings being built on top of them when demand for office space returns.
Also at issue is exactly where the shops should be located. Public officials and potential retail developers prefer street-level stores. They also want the shops to be close together so shoppers can consider lots of choices without taking very many steps.
That strategy would force Mr. Silverstein's office buildings to have small entrances with "sky lobbies" on upper floors, a feature some say could deter tenants who desire grand ground-floor entrances. Mr. Silverstein and the Port Authority have been in fruitless discussions for over two years about the placement of shops.
"We have weekly meeting with Larry and the Port Authority," says Mr. Cahill. "Those discussions ... are making substantial progress but are not quite there yet."
One plan floated at the Port Authority envisions buying out some of Mr. Silverstein's interest in the office buildings, not including the Freedom Tower. The Port Authority or another private developer would then build two of the five planned towers where the agency and the U.S. General Services Administration would be the anchor tenants. The Port Authority would also have private developers build an apartment building and hotel on the site. That would allow 80 percent of the planned retail space to be built quickly and permanently. Port Authority insiders describe the plan as feasible, but only if Mr. Silverstein cooperates.
Mr. Silverstein declined to comment.
Mr. Silverstein's leverage to negotiate with the Port Authority was both strengthened and weakened last week in separate events. A federal court in New York released a ruling that Mr. Silverstein's largest insurer, Swiss Reinsurance Co. can withhold payment of his policy until rebuilding begins, depriving him of at least $200 million in investment income and $300 million in back interest on $877 million of coverage.
Boosting his position, state lawmakers passed a massive rent-subsidy package to lure tenants to his nearly completed World Trade Center 7 and to the first building on the main Trade Center plot to secure a paying tenant -- presumably, though not necessarily, the Freedom Tower.
The Port Authority expects to start officially talking to retail developers by the end of the year. Those familiar with talks say developers include Tishman-Speyer Properties Inc., Vornado Realty Trust, Related Cos. and Westfield Corp. Westfield, which had controlled the rights to retail space at the Trade Center but sold them to the Port Authority, has the option to pay $1 million to make the first offer on the deal.
However retail is wedged into the site, the sensitivities of embracing conspicuous consumerism at Ground Zero will be acute. As an example, say people familiar with the Port Authority's plans, one major retailer has already been told it won't be getting space because of its name: Target Corp. Target spokeswoman Lena Michaud declined to comment on past discussions but did say, "We are not part of the (Ground Zero) development."
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New Shop City
Business was brisk at the old World Trade Center mall; today's demographics point to future retail success.
At the old Trade Center
Stores: 75,including Banana Republic, Coach,Sephora, Borders
Daily visitors: 40,000 office workers, 150,000 tourists and commuters
Annual revenue: $900 per square foot average per store
Average rents: $150 to $200 per square foot
In the area today
Workers: 323,000 within walking distance
Businesses: 7,600
Average private-sector salary: $120,078
Residents: 33,000 in 2004, 40,000 by 2007
Average age: 44
Household income: $153,000 (mean)
Tourists: 5 million per year (13,700 per day) expected after memorial opens
Transit: 13 subway lines and a commuter train from New Jersey
Source: Downtown Alliance, Urban Land Institute, Lower Manhattan Development Corp., WSJ Research