Interview with Michael Ewing, Developer of Grand Central Retail

Michael Ewing is principle of Williams Jackson Ewing, a retail real estate development, leasing, and consulting firm based in Baltimore, and developer of the tremendously successful restorations of Grand Central Terminal and Union Station in Washington, D.C.

In 1994, Williams Jackson Ewing and LaSalle Partners were awarded the rights to redevelop Grand Central Terminal. Williams Jackson Ewing conceptualized, merchandised, leased and opened 119 stores and restaurants, which include a mix of local New York favorites and popular chains. Prior to becoming partner at WJE, he was Vice President at The Rouse Company from 1972-1985.

Ewing is widely recognized as a thought leader on urban retail development trends. He talked to New Penn Station about the retail plan at Grand Central, making public/private partnerships work, and the retail potential of Moynihan Station ("a lot of retail," but could work).

Click here to read the interview.

MAS: As you probably know, the Moynihan Station project contemplates two train stations: Moynihan West in the landmark Farley Post Office and Moynihan East, a new building on the current site of Madison Square Garden. It’s one of the most ambitious and critically important projects in the city. Retail is a major piece of the plan and we wanted to get your thoughts about what makes your train station projects, especially Grand Central, so successful.

Briefly, tell us how your firm became involved with the redevelopment of Grand Central?

ME: Our involvement goes back to Union Station in Washington, D.C. An RFP was issued in 1985 while I was still at Rouse Company and we were one of two respondents. What was unusual was that the RFP was only for ground floor retail, but our proposal, which we submitted with Ben Thompson, an architect who we knew from the Faneuill Hall project in Boston, proposed to expand the retail to make the restoration of the historic train station economically viable. We proposed 200,000 SF of retail when the RFP covered only 100,000 SF. That got the attention of the Union Station Redevelopment Corporation.

Union Station, courtesy of casch52

The MTA had just purchased Grand Central from Penn Central which had gone bankrupt. They saw the results of our work at Union Station and wanted to do something similar in Grand Central. The first RFP was to develop a master plan for the station. The MTA had already engaged Beyer Blinder Belle, so we worked with them to develop a plan. The emphasis was on the economics of the restoration work so we developed business plan to help finance the improvements.

It was not until 1994 that the MTA came up with a financial plan that worked. We entered it with Jones Lang LaSalle and we won the right to be developer of the retail. The vision for the retail was primarily to help the MTA achieve the goal of bringing back Grand Central Terminal to its original grandeur. The MTA was very clear in saying ‘look this is a train station don’t forget that – make sure it works for commuters.’ For retail to work we knew it couldn’t work just for commuters. We knew they are very small part of retail sales. If you only want commuters you would do fast-food, newspaper stands, etc. We saw an opportunity in Midtown Manhattan – one of the premier retail markets in the country - to be a retail center for that market. We felt that tripling the size of the retail would help provide the leverage to make the economics of the restoration work. They really needed a sizable base of retail to support it.

MAS: What was your vision for the project? How was it similar or different from the MTA’s RFP?

ME: In terms of retail space at GCT, there is obvious retail potential for the street level. The opportunities were in the under used sections of the Terminal in the balconies and the basements. The basement has great access via the ramps and also from the trains themselves. But the ramps had been covered up by Penn Central. They were dark and dingy and literally no one went down those ramps. Right away we opened them back up, creating 25,000 sq ft. of retail. We really felt like this was part of the restoration - this was way the building was built. Reopening the ramps was part of giving the original design a new life. The original architect figured out how to connect three levels without using elevators and escalators.

We had some hard decisions to make – for example the MTA was dependent upon the Kodak signs and stores like Fed Ex at main entrance which was an original entrance they had covered up. They had loosely written leases with low-end fast food and retail with no control over tenants in terms of what they could or could not sell and design. We encouraged the MTA to not renew those leases based on a new merchandising plan.

We strategically located commuter shops – coffee shops, etc. but we needed destination retail. We could have provided the same retail as you see the street, but we decided to develop a NY local-based retail community to draw people in. After all many people have to walk by Fifth and Madison Avenues, two of the biggest shopping streets in the city, to get there. We developed a plan of destination retail through restaurants and fashion retail. The balconies lent themselves to restaurants, so we got local New Your restaurateurs and kept the Campbell Apartment business. Those restaurants do phenomenal business. The landmark status prevented them from major alterations on the balconies but in the end it really worked out in the restaurants favor.

The plan for the ground floor was for small stores. We wanted to appeal to both the shopper and commuter. Then there was an old truck dock space on 43rd street that served the oyster bar. We decided to clean it up and put in a fresh food market, now Grand Central Market. We brought in about 15 local operators of fresh food, as opposed to a single operator found throughout New York.

In the basement we had a different type of retail with a combination of cafes and takeout places - all NY operators. We knew it couldn’t conflict with what we had on the street level.

The final component was the entrance on Park Ave. We wanted to do very elegant stores, so we brought in Kenneth Cole, when he was just starting, and Banana Republic.

Overall, the sales per square foot are some of the highest in the city. There is very little turnover and, in fact, many of the little guys have become chains themselves.

MAS: What kind of control does the MTA have over the tenants?

ME: MTA has very strict control over the tenants – typically they have a use clause in each lease about what tenant s are permitted to sell, right down to changes to the menu, whether an item can be consumed on premises or has to be taken home, the level of quality of fixtures, etc. Every tenant has to have plans approved. There is architecture review, construction review. Basically, it’s the same way we would do retail in a mall environment – it’s just a level of detail, the small things that contribute to the big picture. We had the full backing of the MTA which was unusual for a public agency. Peter Stangl, the head of the MTA at the time, really let us be the retail experts. This was extremely important - you can look at other examples and making the partnership work is really the most difficult thing to do. The MTA entrusted us to develop and own it in a private manner. We’ve turned down other potential clients who won’t make that kind of commitment.

MAS: It sounds like this was a case where the public/private partnership really worked.

ME: Absolutely. Plus, a train station does have to prepare for the worst, if a major accident occurs or security situation arises. So it’s always complicated working with the railroads and public agencies with all the security and programmatic issues. I give the MTA lots of credit for making this work.

MAS: How did the landmark regulations help or hinder the project?

ME: It is always difficult to operate retail in a 100 year old building. But Jennifer Raab, who was the chair of the Landmarks Commission at the time, was very smart about how they dealt with it. And we found retailers who would adapt to the building instead of making the building adapt to them.

MAS: Today, how many total people pass through GCT? Percentage commuters? Visitors? Tourists?

ME: When we started it was about 500,000 according to the MTA. I’m not really sure about the current numbers – it’s difficult to count. Union Station is a bit easier to count. We’ve done some surveys there and found that Union Station commuters are only 10% retail customers. Tourists were 25% of the customers. When you think about it the tourists are not really buying clothes. So that means 65% out of Union Station shoppers, a $135 million a year business, comes from people living and working in that area.

GCT has a heavier commuter population. It’s the Metro north, subway, and a lot of the vendors say they get a lot of business from workers who live in Westchester County, for example. On their way home they’ll pick up some fresh meat or produce before the jump on the train. I don’t think the tourists account for much of the business. Commuters are about 25% of the visitors, so I would say 60% of the visitors are doing shopping that represents over $100 million in business.

MAS: Do you think a similar commuter/shopper dynamic will play out in the Moynihan project? The development of Hudson Yards will result in a ton of workers on the West Side.

ME: It’s an awful lot of retail. It’s interesting how this is evolving. Before when you just had the Farley building it was going to be 300,000 – 400,000 SF of retail. However the old MSG site will add at least another 100,000 or 200,000 SF of retail.

Grand Central is a great retail location, and the old Penn Station was the same thing. There is a terrible retail mix there in the current Penn Station. It’s a terrible building and hopefully Farley will provide the dramatic public space that will help become a retail center for the west end of 34th street. But the fact that it functions as a train station is important.

MAS: The current plans for Moynihan East contemplate around 1.1 million SF of retail. Do you think that's too much?

ME: Well, half of it could be some big box – and those stores have been trying for years to get in that market. So I could see that. But it will make Hudson Yards that much more important – it will require more lifestyle retail, shopping, entertainment, and restaurants.

MAS: How are pedestrian flow issues different in train stations vs. other retail environments?

ME: If you remember GCT when you walked in off of 42nd between right next to the Hyatt – it was like a funnel. They put a bank right in the middle that was paying huge rent. And who could pay the most rent was determining the location of the stores – that was the extent of the planning. We created a circulation plan, and we put the retailers in the space where each belongs – regardless of how much rent they were paying. The primary thing was to create great circulation and access. We worked with the architects at Beyer Blinder Belle in the planning and then we placed the retail where it makes sense. Other respondents to the RFP proposed deli space on the balconies - what an insult to the original architect! We put elegant shops in the elegant spaces.

Vanderbilt Hall from georg69de

MAS: How important are the markets, events, and exhibits that rotate through Grand Central throughout the year? Does this help attract shoppers?

ME: It’s extremely important. The Vanderbilt Hall is a great public place. When we did the master plan we said you have a great opportunity to do seasonal, temporary retailing. It’s the least amount of intrusion on the building. We got the MTA to experiment in 1991- they hired some local guys. It was somewhat primitive, but it was a huge success. When we put in the retail program we designed each kiosk. Today, there are about 75 merchants sending applications in a month in advance and paying good rents. It’s also become an incubator for the regular retail spaces. In fact, some of the regular tenants in the passage came from the kiosks in Vanderbilt Hall. So, the temporary retail is a good use of space, it helps to fuel other retail in the station and provides a surprise for customers – each time they come we have something different going on. Now they have Christmas markets all over city.