One of my fondest memories growing up in New York was going into “the city” (that’s what we Long Islanders called Manhattan) at Christmastime and going to see the Lord & Taylor Christmas display in its storefront window at its flagship location on Fifth Avenue. There would be long lines, and we’d wait 20 minutes or more just to get a glimpse of the window. It was magical.
Lord & Taylor Christmas Window Display, 2013
Last month, Hudson’s Bay Company, Lord & Taylor’s corporate parent, announced that it was selling that iconic store to WeWork, the seven-year-old office-sharing start-up, for $850 million. Lord & Taylor will rent back about a quarter of the building for a scaled-down retail store. Somehow, I think the Christmas window will lose a little of its luster.
This transaction carries far greater implications than the potential loss of a New York holiday favorite. While interesting, singular events like this are just noise; by themselves, they say little about the broader trends and forces that create the conditions for events like this to occur. It’s more meaningful to view this sale as an indicator related to how the new economy is cannibalizing the old, shifting real estate patterns and trends, and changing the very nature of leisure and work.
When the Lord & Taylor store at 424 5th Avenue first opened, it boasted three dining rooms, a manicure parlor for men, and an equestrian wear department that featured a mechanical horse that could walk, trot, or gallop so that shoppers could try on and test their jodhpurs or knee patch breeches. Shopping was less of a chore and more of a leisure or recreational activity. The fact that WeWork is acquiring a physical retail location in which shoppers dined and rode mechanical horses in a way has us coming full circle, as the company is known for blurring the lines between work and leisure. In our blog from September, we noted that “WeWork . . . views office work as occupying an extremely large value chain that encompasses where and how freelancers, small businesses, and large enterprises work, live, and interact with others.” It is blurring the lines between leisure and work, in the same way that Lord & Taylor viewed shopping not as a chore, but as a leisure activity.
This dichotomy is further reflected in broader real estate trends. As brick and mortar retail locations continue to struggle not only because of the encroachment of e-commerce, but also due to shifting patterns in consumers’ preferences for physical retail (small over big, local over national, authentic over cookie-cutter), the U.S. retail landscape is littered with malls that once thrived in the 80s and 90s, but today house vast expanses of unoccupied square footage. Taken to the extreme, one could argue that the one thing of value big department stores – anchors in those less-than-half-occupied “zombie malls” – have left to sell is their own real estate. Where racks of men’s suits, convertible sofas, and cosmetics once stood, movie theatres, rock climbing walls and community colleges now live – places for people to learn and be entertained. Retailers are monetizing their physical locations so that they can be repurposed increasingly for leisure activities.
The fact of the matter is that young professionals moving into cities like New York like to shop – not at the Lord & Taylor of my youth, and certainly not at the Macy’s in the suburban mall 15 miles away. Companies like WeWork are able to spot this early, and thus create an opportunity to disrupt not only where and how individuals work, but how they live and play as well, all to their benefit. WeWork’s acquisition of Lord & Taylor’s flagship store is more than just the new economy taking over the old; it’s about the fundamental redefinition and blurring of the traditional lines between work and leisure, and how one innovative company is adept at seeing that sooner than its rivals and capitalizing on it. Businesses should be on the lookout for further indicators that will continue to drive this transformation forward, avoid being fixated on any one particular event, and constantly explore the implications, opportunities, and challenges of the emerging conditions.