Analysts Ponder Wal-Mart in NYC

By Ian Ritter
Globe St. Retail
December 10, 2004

NEW YORK CITY-Wal-Mart’s proposed store in a Vornado Realty Trust development in Rego Park, Queens, could just be the beginning of an overall push into the city by the largest retailer in the world, industry observers say. Plans for the store follow urban openings by the Home Depot and Target here earlier in the year.

Wal-Mart is not releasing many details about its Queens store. A company spokeswoman says it will be a standard Wal-Mart discount store without perishable groceries, as opposed to a Supercenter. Though the unit will be on one level, it is still not decided what floor of development will house the store. The unit could open some time in 2008. The company has no specific plans to expand in New York City, she says.

The retailer could eventually open about three stores in each of the city’s boroughs, including Manhattan, says David Rosenberg, an EVP at New York City-based real estate services firm Robert K. Futterman & Associates. "Wal-Mart’s understanding of the market will determine how many stores there can be."

Big-box retailers are moving into urban areas such as New York City because, in many cases, they don’t have much more room to expand in the suburbs, Rosenberg says. "The main problem those companies will face, besides high real estate costs, is adapting their store formats to urban environments. The biggest obstacle for these companies is to look beyond the typical prototype location."

The stores Wal-Mart is able to build in New York City will be the chain’s most successful, says Howard Davidowitz, chairman of New York City-based Davidowitz & Associates, a retail consulting and investment banking firm. "The Rego Park move is brilliant," he says, noting the sales at nearby Queens Mall, which are among the highest posted by a US shopping center. "These are middle-class customers. These are Wal-Mart customers."

Davidowitz also thinks the chain has the potential to open stores in other boroughs, as well as add more in Queens, but he says he is skeptical of a future store in Manhattan. "Target has looked for years, but all they’ve done is a temporary store," Davidowitz says, yet notes that there is a slight possibility such an opening could happen.

Though it does not yet have New York City store, Wal-Mart is nearly everywhere else in the country. The retailer operates more than 3,600 stores across the country and expects to increase its total square footage by 8% next year.