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Macy’s Needs Another Miracle on 34th Street
Retailer wants to add its own skyscraper to Manhattan’s office glut
By Kim Bhasin , Jordyn Holman , and Natalie Wong
May 27, 2021
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Jeff Gennette, the chairman and chief executive officer of Macy’s Inc., knows people are talking about his big bet on New York City. And that they might even think he’s out of his mind.
This month, Gennette said he’s still committed to building a multi-billion-dollar skyscraper atop the company’s Herald Square flagship — plans that city officials, developers and the retail industry thought the pandemic might force him to scrap. He also said Macy’s would invest $235 million in the area surrounding the store.
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The projects, as Gennette envisions them, will convert a thoroughfare marked by unpleasant transit hubs and 99-cent pizza shops into a gleaming, pedestrian-friendly, urban oasis dedicated to American style and consumption.
Yet a lot more is riding on Gennette’s blueprints than an office tower and a neighborhood revitalization. As New York City begins to reawaken after 14 months of Covid hibernation, Gennette sees a Macy’s rebound as dependent on the city’s comeback, and vice versa.
“New York City is Macy’s and Macy’s is New York City,” said Gennette. “This is the right project. This is the right asset. We want to do it carefully. This is our crown jewel.”
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Macy’s fortunes have long been tied to the vitality of the city that is home to its best-performing store and most valuable real estate. The largest department store in the U.S., the Herald Square mothership sits at two of the busiest pedestrian intersections in the country. It already spans 2.5 million square feet — slightly bigger than the Louvre in Paris — with an eight-story sprawl of handbags, dresses and home goods that lure locals and visitors from around the world. The new tower would add an additional 1.5 million square feet of office space.
Becoming a real-estate developer may well be Macy’s best survival strategy. Department stores and the malls they anchor are in freefall across the U.S. When Gennette assumed the top position in 2017, the company was already thinking about ways to monetize its real estate in some places and cut its losses in others.
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In a restructuring announced before the pandemic struck, the company said it would close 125 of its then 525 stores. It also abandoned a second home base in Cincinnati and closed a digital division in San Francisco. New York is Macy’s sole headquarters now.
Getting city officials to back the developments will be a grueling process, one that tripped up Amazon.com Inc. two years ago. Gennette’s timing isn’t the best, either. Like other urban centers, New York has seen an outflow of residents, a spike in gun violence, a decline in property tax revenue and a tsunami of restaurant and small-business closures from the pandemic.
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”There’s been a lot of conversations about, hey, do we need more office space in the city right now?” said Gennette, 60. “This is the long play.”
The CEO brimmed with confidence as he sipped coffee in the same oak-paneled room on the 13th floor of Macy’s headquarters where the 1947 movie, Miracle on 34th Street, was filmed. Gennette has been coming into the office regularly, in a blazer but no tie, commuting from his home in Brooklyn between trips to regional stores.
He’s looked over 3D models of his gleaming glass tower and how it’ll reshape the skyline, as architects work on the final design. He has begun talks with developers, though Gennette wouldn’t say which ones or how much the project would cost. They’ve not yet struck a deal.
In recent years, with new developments like Hudson Yards and renovations to Pennsylvania Station, the subway and train hub a block away, Midtown Manhattan’s center of gravity is moving south toward Herald Square, Gennette said. If he’s to take advantage of that shift, he’ll need to clear many hurdles, including the city’s multiple layers of rezoning red tape. He’ll also need to assuage clashing community interests, ranging from neighborhood activists and small businesses to environmental groups and unions.
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To help cement his legacy and win support for the projects, Gennette plays the history card: He notes that Macy’s is no Johnny-come-lately, having opened its first store in the city in 1858, before the Civil War. The iconic Herald Square store has been there for almost 120 years. The project he’s pitching to investors, city officials and the nearby community is about the next 100 years.
The developments, he claims, would do as much for New York — generating $269 million in annual tax revenue while spurring $4.29 billion in economic output annually — as they would for Macy’s. That, of course, assumes the office market has rebounded by the time the Macy’s tower is built, which is likely several years away.
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NEW YORK is Back!
“Office buildings are our factories – whether for tech, creative or traditional industries we must continue to grow our modern factories to create new jobs,” said United States Senator Chuck Schumer.
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