Lord & Taylor’s flagship store in Manhattan, known for its holiday displays along Fifth Avenue, is being sold to the office space sharing company WeWork.
The nearly 100-year-old building will be converted to WeWork headquarters, with room remaining for a Lord & Taylor store. WeWork attracts millennials who are looking to share office space, a consumer segment that Hudson’s Bay and other department stores want to attract. So store executives expect the stores to benefit from WeWork members going in and out of the building, and hope they’ll be shopping.
Lord & Taylor will keep the whole building with its usual operations through next year’s holiday season. The $850 million sale, announced Tuesday, is part of a plan by Hudson’s Bay Co., which owns Lord & Taylor, to pare down debt and reinvigorate sales.
Richard Baker, chairman of Hudson’s Bay, told The Associated Press that WeWork will also lease space in the upper floors in three of the company main stores — Hudson’s Bay stores in Toronto and Vancouver, Canada, as well as its Galeria Kaufhof in Frankfurt, Germany.
Department stores have been struggling to follow their customers online, with many closing stores and selling lucrative real estate. Big chains like Macy’s had been under pressure from shareholders to get more value out of their real estate holdings. But the Hudson’s Bay deal with WeWork is a change in how retailers are trying to capitalize on their real estate.
“We definitely think there is a future for department stores for people who reinvest in the business,” Baker said.
On Friday, Hudson’s Bay had said that CEO Jerry Storch would step down at the end of the month. Toronto-based Hudson’s Bay owns stores under its own brand as well as Lord & Taylor, Saks Fifth Avenue, and Saks Off 5th.