People wear protective face masks outside Home Depot in the Flatiron district as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on August 8, 2020 in New York City.
Noam Galai | Getty Images
Home Depot is getting ready to bulk up its presence in Manhattan next year, taking over a massive space that is being vacated by Bed Bath & Beyond.
The home improvement retailer has signed a lease for a Gazit Horizons-owned asset on Manhattan’s Upper East Side, at 410 E. 61st St., which spans more than 120,000 square feet over four floors.
Bed Bath & Beyond’s current lease expires in 2021. The deal by Home Depot marks one of the largest retail leases, by both size and total annual rent, on record to have been reached in Manhattan in recent years.
Home Depot will be paying roughly double in rent what Bed Bath & Beyond was paying, according to a person familiar with the terms of the deal.
“We signed the lease in April,” Jeff Mooallem, president and CEO of real estate company Gazit Horizons, said in an interview. “The biggest hang-up in the deal was neither party knew what it would cost to retrofit this. … Both of us needed to do some due diligence to see if the deal was even achievable from a structural stand point.”
“The reports of retail’s death in New York City have been greatly exaggerated,” he added. “The execution of this lease, at the peak of the Covid-19 pandemic, is an important sign of confidence in New York.”
In the midst of a multiyear turnaround plan, Bed Bath & Beyond has said it will close 200 of its namesake stores in the next two years. It has released the locations for roughly 60 shops that will close by the end of 2020, including the Upper East Side store. It still operates a handful of other locations in Manhattan, including on the Upper West Side.
Meantime, the retail real estate market in New York has been hit hard by the coronavirus pandemic, as it has in much of the rest of the country, with tenants unable to pay rent or being forced to vacate properties entirely.
Average asking rent for retail space in New York fell during the third quarter of 2020 for the 12th consecutive period, to $659 per square foot, down 12.8% year over year, according to data from commercial real estate services firm CBRE.
Home Depot currently has two locations in New York City, one in the Flatiron neighborhood and one in Midtown.
A representative from Home Depot did not immediately respond to CNBC’s request for comment.
Both Home Depot and Gazit Horizons, which is the North American subsidiary of Israel-based Gazit Globe, were represented by commercial real estate services firm Ripco.