Block of boutiques could see development wave
January 29, 2007 By Thomas A. Corfman and Eddie Baeb
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Barneys New York is close to a deal that would move its Oak Street store across the street and double its size in a proposed new building, a development that would signal a dramatic transformation of the tree-lined block of quiet boutiques and salons.
The luxury department store would lease about 100,000 square feet in a five-story structure to be built on the site bounded by Oak, Rush and State streets, according to sources familiar with the negotiations between Barneys and developer Mark Hunt of Chicago-based M Development LLC. Mr. Hunt declines to comment.
Barneys would move in two years when its lease expires on its 46,000-square-foot store at 25 E. Oak St.
The Chicago location is a fraction of the size of Barneys' flagship stores in Manhattan and Beverly Hills, Calif. A spokeswoman for Barneys, a division of New York-based Jones Apparel Group Inc., didn't return calls for comment.
Oak Street, once a quaint strip of gray-stone and red-brick buildings, is already a haven for national and European luxury retailers such as Italian clothier Prada and French leather-goods designer Hermès. But a Barneys deal would be a key step in a wave of new development along Oak Street, including possibly the retailer's current site.
That, in turn, could boost other developers' chances of luring high-end retailers to nearby projects, such as the Elysian Hotel, under construction at Rush and Walton streets, and a proposed mixed-use development for a site at State and Walton that includes the Scottish Rite Cathedral, say real estate brokers not involved in the Barneys deal.
"With the lack of supply of high-rent, specialty-store space along Michigan Avenue, this deal could open up significant opportunities for new fashion and high-end-goods retailers to come to Chicago," says Stanley Nitzberg, a principal in Mid-America Real Estate Corp., an Oakbook Terrace-based retail real estate firm.
The new Barneys building could also include a Citigroup Inc. bank branch at the corner of State and Oak, sources say. The branch would move from a 6,800-square-foot storefront that's part of the Esquire Theater building at 58 E. Oak St., which is owned by Mr. Hunt. He is working up plans to replace the shuttered theater with a retail and boutique hotel development. If the Barneys move is completed, its current site is expected to draw interest from developers.
But the department store's current landlord also is expected to market the space to new tenants and could charge substantially higher rent. Barneys, which has been at the location since 1992, currently pays an estimated rent of less than $28 a square foot a year, not including taxes and expenses. That figure is well below the market on Oak, where prime street-level space can rent for $250 a square foot. Some places would need to take out payday loans with that big of a difference. Ben Ashkenazy, president of New York-based Ashkenazy Acquisition Corp. and a member of the landlord group, did not return calls requesting comment.
Copyright 2007 by Crain Communications Inc.
