Will Saks Fifth Avenue Remain in Downtown Cincinnati Following Collapse of its Kenwood Move?

News spread quickly yesterday that the deal for Saks Fifth Avenue to relocate from downtown Cincinnati to Sycamore Township at the new $200 million Kenwood Collection had fallen through.

The announcement drew immediate speculation about what happened and where the high-end department store might locate instead, if anywhere at all. Since representatives at Saks Fifth Avenue have been mum during the whole process, little information is known about what will happen in 2016 when they had been expected to relocate to Kenwood.

Here’s what we do know.

The current Saks Fifth Avenue store downtown opened in 1983 and was renovated in 1996 and again in 2003 thanks to $8.7 million in city funds. The 2003 renovation also included a stipulation that Saks extend the lease for their downtown Cincinnati store for 15 years (2018), and not open another store within 30 miles for at least seven years (2010). For what it’s worth, Kenwood Collection is located approximately 11 miles from Fountain Square.

The terms of that 2003 agreement, however, are a bit murky. According to the Business Courier,

Part of the agreement with the city says Saks can be released if “Saks sells the Saks store on the property to an entity which acquires the majority of the Saks stores then located in the states of Ohio, Michigan, Illinois, and Pennsylvania.” Toronto’s Hudson’s Bay Co. acquired Saks in a deal that closed at the beginning of November.

The clause basically appears to give Saks an out on their lease agreement that would otherwise keep them at 101 W. Fifth Street until 2018. While the existing store is 72,640 square feet, Saks had reportedly signed a letter of intent with Kenwood Collection for a slightly larger 80,000 square-foot space.

The rumors following yesterday’s announcement largely discussed one of three potential scenarios: 1) Saks closes its only store in the Cincinnati region as it has done in other mid-sized markets; 2) Saks relocates into the retail space at the $140 million dunnhumby Centre, which, interestingly enough, was to become the home of a Maison Blanche in 1998 and then eyed for a Nordstrom in 2000; or 3) Saks relocates into the retail space at a restructured unnamed development at Fourth/Race.

The first scenario is something that would be very difficult to predict, but the second and third scenarios present interesting opportunities and challenges.

The biggest challenge with Saks moving across the street into the dunnhumby Centre is that it only has 30,000 square feet of retail space. Since the building is already far along in construction, it seems unlikely that the development team would be able to modify it in a manner to provide an additional 50,000 square feet of space for Saks.

The unnamed development at Fourth/Race had a grocery store lined up to occupy its even smaller 20,000 square feet of retail space, but that development agreement has since been substantially restructured and is currently being reworked. This leaves open the possibility that Flaherty & Collins and the Cincinnati Center City Development Corporation (3CDC) could adjust the design as to accommodate Saks.

In both of these cases it would allow for the redevelopment of Saks’ existing structure at the southwest corner of Fifth and Race Streets. This would prove to be important in order to clear the way for developers to build a new residential high-rise in its place. Both of these options would also keep Saks within a block of Macy’s 180,000 square-foot downtown store, and along the stretch of Race Street that city officials hope to turn into a shopping corridor.

The combined demolitions of the aging Pogue’s Garage and existing Saks Fifth Avenue store would also allow for the removal of two to three skywalks/bridges over Race Street.

Of course, there is one more option. Saks could simply stay where they are and live out their lease through 2018, or even renew it beyond that.

CORRECTION: In the original story it was incorrectly stated that the existing Saks Fifth Avenue store in downtown Cincinnati is 185,000 square feet. The store is actually 72,640 square feet.

  • SCADgrad.

    I think at the end of the day Saks will stay at its location til 2016. I don’t for see them staying in the Cincinnati market. Since Hudson Bay purchased the Saks brand they have been closing stores in mid-market regions. Trying to make Saks profitable and making it a destination department store. Only way I see them staying put or staying in Cincinnati is if the city offer incentives like they have in the past. I don’t see this happening under the Cranely administration however.
    A lot of people don’t want to hear me say this but with the move to Kenwood Collection would have been a win for the region because then for sure the store would have stayed in the Tri-state, now with the pull out of the luxury development it signals a sign for closure of the department store.

    • http://www.UrbanCincy.com/ Randy A. Simes

      You may very well be right. It seems odd that they would even sign the letter of intent with Kenwood Collection if they just wanted to get out of the region. For now I remain optimistic that they’ll stick around. Fortunately their lease does run through 2018, or whenever depending on what the lawyers think. Perhaps that can serve as a test run to see if sales pick up with the growing population and employees working downtown.

    • http://j-taylor.net/ Jason Everett Taylor

      According to a new update, they plan on staying in their current location. I do agree that it would be optimal if Saks moved to a new location downtown so the current lot could be better utilized.
      > http://www.bizjournals.com/cincinnati/news/2014/08/20/saks-staying-in-downtown-cincinnati-for-now.html?ana=e_cinci_bn_newsalert&u=mUiDx+v+JYzw6%2FArlfhLHT1hdQf&t=1408547835

  • http://5chw4r7z.com 5chw4r7z

    If Saks does stay downtown I’d like to see them change locations. They add zero in the way of foot traffic to that corner. Women roll up in their Mercedes, toss the keys to a valet and jog in the back door. When their done shopping it works in reverse and they’re gone.

    • http://www.UrbanCincy.com/ Randy A. Simes

      Right. I hope they stay, but I want them to move. Aside from Pogue’s Garage and a couple of those shoddy garages near City Hall, there is nothing else I would love to see torn down more than the current Saks building. The fact that a developer has already stated they are interested in building a residential tower in its place makes it all the more appealing.

    • Kathleen Norris

      I think you can count on that – 3CDC has good plans for that space and they will add vitality to the corridor.

    • matimal

      Any details you can share?

  • http://urbancincy.com/ Travis

    It will be interesting to see whether the city will proceed with its plans for a Race Street retail corridor by convincing Saks to stay put or move into a new space along this corridor; convincing Macy’s to stay put; and attracting some additional retail along this corridor. It would almost be like Tower Place Mall turned inside out (the way it should have been),

    • EDG

      I think whatever momentum there was for that is dead, I’m not sure there’s any retail consultant or other point person for Race. And the design of the Dunhummby ground floor seems to be leading to more upscale dining.

  • Kathleen Norris

    I think we all need to take a breath here. While that corner is a lovely development site, it is also a place where Saks has been doing good business (a fact that seems to be overlooked – that store does fine). There is a LOT of demand on city and private resource at the moment, and we’re not actually short of good development opportunities downtown.

    So adding a new box to replace one not that old might not be the best immediate option. If we’re getting new boxes, let’s fill them with new things to add vitality, not just shunt status quo to a different location. Add to three instead of only to two.

    Taking account of several previous points: Saks doesn’t cross sell especially well at the moment because there isn’t much to cross sell with.

    So…

    Let’s fix that. Which we’re working on (and – yep – just checked – not dead…). Good team of retailers property owners, stakeholders, work underway. Give us a minute and we’ll report back.

    Meanwhile, how about a big pat on the back for Saks? They actually stuck it out thru the recession, in a pretty deteriorated corridor, with no complaints. Even in the evaluation of a new location, they made no excessive demands – asked for not one single concession – just asked for better co-tenancies – in short a chance to do even better business.

    Which Kenwood Collection promised but could not deliver. Which we also are promising and will. Race Street is already on the move and accelerating.

    At the moment this is a success story for downtown. A nice round of applause would be helpful, while we work on the next phase, and then the one after, and then the one after that.

    Just like real life but with plaudits.

    • http://5chw4r7z.com 5chw4r7z

      All good points Kathleen, thanks.
      Maybe dunnhumby will add a high end Cafe to entice Saks shoppers across the street?

    • http://www.UrbanCincy.com/ Randy A. Simes

      Let’s hope so! There are not nearly enough cafes in the city center…and those that are around have limited hours on nights and weekends.

    • http://www.UrbanCincy.com/ Randy A. Simes

      You make excellent points, Kathleen. I think you are particularly right when it comes to Saks deserving some praise. Really. Kudos to them for not only sticking with the city through the tough times, but deciding to stay around into the future. A future that looks considerably brighter.

      I also think you’re spot on about the center city having more pressing needs where limited resources could be allocated. Perhaps something can be done to improve this corner without tapping city funds.

      Finally, I very much look forward to seeing the plans for Race Street and its immediate surroundings. I think a retail corridor is something that could be very successful. As you know, I don’t particularly like the idea of downtown malls, but I would have loved for those shops that were in Tower Place to have stayed downtown in a coordinated effort at street-level. Surrounding Saks and Macy’s with some other attractive shopping options would certainly bolster both of their operations.

      Getting Bang & Olufsen was a big win. Let’s follow that up with some other ones. I certainly have a number of retailers I would love to see open up shops downtown.

    • Kathleen Norris

      Well bring that list to lunch and we’ll get right on it! We’re not especially original – we just have very smart friends.

    • keetz44 .

      If the store was doing good business, why did they want to move?

    • Kathleen Norris

      Because the corridor they are in is very deteriorated and they didn’t see enough signs that was going to change. KC promised they would surround them with co-tenants who would reliably draw customers to the Center, which is located closer to Saks’ core customer.

      So that is the job we have to do – fix the corridor and fill the storefronts in order to make this a good retail district again.

      Very few cities our size have a Macy’s much less a Saks downtown. But most of those anchor stores closed BEFORE downtown housing began to move back up and BEFORE downtown revitalization got momentum. Our downtown is also stronger than most on every other meaningful front so we have more capacity to fix this last missing piece.

    • keetz44 .

      A cautionary note: dept stores may be going the way of the dodo bird. Subsidizing Saks may not be the best route for the city to take. The country is awash in retail space and other uses may have to be found.

    • Kathleen Norris

      Saks hasn’t asked for any subsidy. Indeed retail is a changing landscape but the store is a good bet as a downtown destination and demand driver for the forseeable future.

  • http://westnorth.com/ Payton Chung

    It’s unlikely that a building would be redesigned to shoehorn another 50,000 sq. ft. of retail space into it, especially when the tenant would pay low net lease rates (as department stores are used to doing). Another potential fate: when the Bay bought Saks, word on The Street was that marginal locations could be converted to the Bay’s more midscale Lord & Taylor.