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The History Behind the Subterranean Retail Hubs of Rockefeller Center, Grand Central and Penn Station

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The History Behind the Subterranean Retail Hubs of Rockefeller Center, Grand Central and Penn Station January 26, 2016 The History behind the Subterranean Retail Hubs of Rockefeller Center, Grand Central and Penn Station By Scott Klocksin There’s nothing like an epic snowstorm to make you want to hide underground. We recently caught up with Eastern Consolidated principal Adelaide Polsinelli and New York Historical Tours director Kevin Draper and did just that at three of the city’s most famous spots for subterranean shopping. The 22 acres that cover Rockefeller Center were the original home of the New York Botanical Garden, before it moved to the Bronx. In the 1850s, Columbia University began buying up land in the area, and leased the land out to users, most famously John D Rockefeller Jr., until the land was sold to The Rockefeller Group in 1985. (Tishman Speyer owns it now, after paying $1.85B for it in 2000. RXR picked up a 99-year ground lease for 75 Rockefeller Plaza for $420M in late 2012.) Kevin says it came down to a combination of historical accident and real estate acumen that brought Rockefeller Center into being. Oh, and the massive oil and real estate fortune Rockefeller could deploy. That didn’t hurt. In the 1920s, banking magnate Otto Kahn convinced Rockefeller to build a new opera house at the site. Trouble was, the Great Depression hit, the opera house as originally conceived proved not to be viable, and Rockefeller was faced with a choice: pull out of the project or double down and do something transformative and finance it mostly on his own. He chose the latter, and Kevin says that to do it, Rockefeller had to do what today would be just about unthinkable: he approached every individual tenant in the low-rise buildings on the land and convinced them to take a buyout. Rockefeller’s idea was to link the complex, which would ultimately come to 19 buildings, with underground corridors—about a mile of them in all, Kevin says. Attractions like one of the first modern escalators, and the now-world famous Christmas tree and ice skating rink, were a way of getting people to the complex to shop underground—which was a tough sell at first, Kevin says. Saks Fifth Avenue refused to allow an underground passageway through its property, Kevin tells us, because the store didn’t trust the untested idea and thought it might bring the wrong kinds of people around. Nowadays, it’s not such a hard sell. Adelaide tells us the combination of prestige and foot traffic commands rents that can hit $250-$500/SF for a 2,400 SF spread, depending on where the space is within the concourse. The current Grand Central Terminal opened in 1913 to be the grand terminus of the newly electrified rail line leading to points north. The trains had been steam powered before the early 1900s, and the real estate dynamic was kind of the opposite of what we have today: most people didn’t want to live or set up businesses anywhere near trains. These days, Adelaide says, near the trains is exactly where you want to be. She says about 750,000 people pass through Grand Central every day, and the number’s closer to a million around the holidays. Let’s put that in perspective: Macy’s flagship store at Herald Square gets about 55,000 visitors a day. And it’s not just the numbers. Consider the demographics: about half the people passing through make six figures, Adelaide tells us, and 20% pull in $200k or more. That helps certain kiosk-type spaces in the terminal hit rents as high as $8k/SF. And of course, the Terminal’s retail centerpiece is the envy of just about any landlord: the world’s largest Apple Store. Apple pays around $60/SF for its 23k SF footprint overlooking the famous concourse. Other retailers in the building pay a portion of any profits made from sales, but Apple keeps its profits at the Grand Central store. Why such a sweet deal? Adelaide says it boils down to how badly the MTA, which owns the building, wanted them. “Some tenants are worth those kinds of concessions for the cachet they bring and their reliability as tenants,” she says. We might not have the terminal today if a plan hatched in 1968 to build an office tower in its place had succeeded. Jacqueline Kennedy Onassis led efforts to preserve the terminal, and Kevin says that effort to save it may have had the momentum to succeed because of leftover anger at the loss of another famous railway station about a mile and a half to the southwest. The original Penn Station, designed by McKim Mead & White and opened in 1910, had ceilings about twice the height of those at Grand Central and was hailed as a masterwork of Beaux-Arts architecture. It was in an area near today’s Garment District that was called the Tenderloin because, the lore goes, local police would brag that extra income made turning a blind eye to organized crime would allow them to eat lavishly. The idea, Kevin says, was for the Pennsylvania Railroad to compete with the New York Central Railroad, which controlled Grand Central, and in the process transform the Tenderloin into a top-flight commercial district. But by mid-century, the rise of the private automobile and steep declines in long distance rail travel meant that both railroads struggled, eventually merging by the late '60s. Something had to be done, and as so often happens in NYC, it had to start with real estate. The original terminal was torn down beginning in 1963 to make way for the station we know today. Preservationists were horrified. Kevin says the loss of the original building galvanized modern preservation in NYC more than any other single event. “You used to enter New York City like a god,” Kevin says, referring to the experience of emerging into the cathedral-like spaces of Grand Central and the original Penn Station. “With this new terminal, you were entering like a rat.” Few of the original flourishes survive, but Kevin pointed out a set of red beams that he says survived the demolition by sheer accident. “The lack of care put into the design was really astounding,” he says. Fret not, ye who cherish old things. Across Eighth Avenue from the station sits the Farley Post Office, designed in tandem with the original Penn Station by McKim Mead & White. It figures prominently in a $2B proposal to redesign the station. Instead of being all underground, it’ll have broad skylights and offer views of the historic post office. The plan, as it stands, calls for $1B to go toward new retail development along Seventh and Ninth avenues, including in the Farley. Adelaide admired the post office building as we emerged from underground and wrapped up the tour, offering a parting thought: “I smell an Apple Store in there.” .
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