Brookfield Properties isn't buying into the notion that malls are over—and it's willing to shell out $250 million to back it up.
The real estate developer is less than a year away from completing a total reinvention of the area formerly known as the World Financial Center in Manhattan's Financial District, designing it to be a true luxury destination for locals with a tourist lift to boot.
It's one of two major projects under way that will redefine the downtown scene that was once left shattered in wake of the September 11 tragedy—but is remaking itself as a hub for businesses, affluent residents and tourists.
"You basically have all of Chicago's office stock sitting on the Southern tip of the island," said Ed Hogan, national director of retail leasing for Brookfield Office Properties. "It truly is the most underserved retail district in the nation."
Known as Brookfield Place, the project is making over what was previously an office building complex that housed 170,000 square feet of retail space, seemingly as an afterthought. From its foundation, the firm is creating 200,000 square feet dedicated to luxury shopping, boasting high-brow tenants such as Diane von Furstenberg, Michael Kors and Hermès.
It will also include seven restaurants—including a French marketplace called Le District, similar to the Flatiron District's Eataly, and award-winning chef Jose Garces' first New York City space—14 fast-casual restaurants, and an Equinox fitness center.
Paired with skylights and three-story glass walls throughout the space, it's a shopping thoroughfare that caters to the mix of executives, Wall Street suits and fashion tenants—courtesy of Condé Nast's new downtown headquarters—either living or working in the area, or in neighboring parts of Manhattan or New Jersey.
It's also a nod to the district's growing population, which has almost doubled to 60,000 in the past decade, Hogan said.
"We didn't really look at it as a mall. We looked at it as a New York City experience," he said. "People like to buy luxury in beautiful places."
As part of this luxury experience, the property will feature a concierge, valet parking and Deliv, a delivery service that can bring a shopper's bags to their home or hotel at a scheduled time. And with rent prices in the range of $350 to $500 per square foot, it's bringing the experience to its tenants for a discount compared to Fifth Avenue prices, which can top $2,600 per square foot between 49th and 60th streets, according to Cushman & Wakefield.
Brookfield Place has so far signed 80 percent of its approximately 40 fashion tenants, though it's only announced about 15 names. The firm plans to have all of its tenants secured by July, and is expecting to ring in more than $2,000 per square foot annually, Hogan said.
But Brookfield isn't the only developer making its mark on the downtown shopping scene. Set to open in second quarter 2015, Westfield Group is renovating the mall at the World Trade Center site—a project that will cost $20 billion in its entirety—only about a five minute walk from Brookfield's space.
Though Westfield has yet to announce names of the expected 150 tenants in its 365,000 square-foot-shopping area, it's expected to offer a mix of brands typically seen at a regional mall. Westfield did not respond to requests for comment.
Just another short walk away, near Century 21's flagship discount store on Cortlandt Street and a nearby Urban Outfitters, Gap and fast-fashion store Zara just signed leases. There have also been reports that Saks will open an Off Fifth outlet store in the area, though the company did not respond to requests for comment.
Following the completion of these projects, consumers will be able to shop from the low- to the high-end in about the same time it would take them to stroll from one end of a regional mall to the other, Hogan said.
"We have the ingredients for a vibrant, growing 24/7 environment ready for a retail renaissance in lower Manhattan," Cushman & Wakefield wrote in a recent report.
Jesse Tron, a spokesperson for the International Council of Shopping Centers, said that because the area is up and coming, and because Westfield and Brookfield's centers will likely offer a different tenant mix, the projects won't cannibalize each other.
"There's plenty of people and plenty of money," Tron said. "Manhattan is a totally different animal from other markets in the country."
On the other side of the downtown landscape, plans are also under way to revamp the South Street Seaport and its retail footprint. Farther uptown, back on Manhattan's West Side, seven levels of shopping are expected to open in 2018 at the forthcoming Hudson Yards complex.
The projects all echo the sentiment of many experts across the industry—bricks-and-mortar shopping isn't dead, its emphasis simply needs to shift toward being about an experience.
"Where the malls are really dying is where [they're] just a commodity and [they're] not an experience," Hogan said. "The sales are going to prove us right."
—By CNBC's Krystina Gustafson.
Correction: This article has been updated to reflect the correct amount of retail square footage at Brookfield Place.