The U.S. commercial real estate rent is surging at a fast rate. This brought the closure of Toys "R" Us' flagship store and the FAO Schwartz in Times Square, New York.
According to CNBC, Toys "R" Us was forced to shut down its flagship store after its rent allegedly reached to $2,500 per square foot. The 110,000-square-foot store closed on Wednesday after its operation for 14 years. The toy retailer was patronized by locals and tourists alike for its wide range of entertainment including its 20-foot-tall robotic T. Rex, 60-foot-tall indoor Ferris wheel, themed cars and 4,000-square-foot Barbie dollhouse.
However, Robert Futterman, founder of retail leasing and investment sales brokerage firm RKF, claims that Times Square will continue to be a prime commercial spot despite the rent hikes. "Times Square is still the No. 1 attraction in the world," Futterman said. "For a company like Gap and Old Navy, brand recognition is critical, and the same for a lot of other tenants that are looking to open in Times Square."
According to New York Times, Toys "R" Us had been renting the space since 2001. It is one of the few first retailers that rented in Times Square. Although the branch closed its operations, Elizabeth Gaerlan, the director of corporate communications for the store, assured that they are searching for a new location somewhere in Manhattan. Toys "R" Us and its sister company, Babies "R" Us, have 17 branches in New York.
Toys "R" Us leased the property in Times Square while occupying the ground, second level and the mezzanine floor. It is said that the toy retailer spent around $42 million just for renting the ground level, which has a price of $2,500 per square foot in the market. Gap Inc is reportedly going to rent about 60 percent of the space that Toys "R" Us previously occupied.
