A majority of New York’s iconic Lord & Taylor department store is being turned into office space.
The flagship location, known for its Christmastime displays on Fifth Avenue, has been sold to the office company WeWork for $850 million. The 650,000-square-foot building will be transformed into office space for all but a remaining 150,000 square feet for the store by 2019.
Hudson’s Bay, a Canadian retail company that owns Lord & Taylor, Saks Fifth Avenue and other luxury retailers, will get a $500 million equity investment from Rhone Capital, which represents 21.8 percent of its shares. HBC — which has been facing pressure from an activist investor to ditch some of its stores amid sluggish sales — also plans to sell office space in buildings occupied by department stores in Toronto, Vancouver and Montreal.
The deal will go toward reducing HBC’s debt by more than $1.1 billion.
“This is a transformative partnership that rethinks how retailers create exciting environments and leverage less productive space, while substantially improving the value proposition,” HBC executive chairman Richard Baker said in a statement. WeWork provides shared office space to startups and is particularly popular among millennials starting businesses.
Lord & Taylor has been operating in New York since 1826, with the current location open for nearly 100 years. The drastic downsizing marks a new era at a time when many large stores have been struggling to keep doors open.