With Time Warner having a deal in place to move from Columbus Circle to Hudson Yards, a new Fairway Market slated to anchor retail space in Coach’s headquarters at that development’s South Office Tower, and the clock ticking on Madison Square Garden, the timing couldn’t be better for us to take a long look at two transformative real estate developments that will transform the West Side of Manhattan for generations to come. Acknowledging their role in shaping 21st century Manhattan, Bisnow convened two panels of industry all-stars to discuss the status of Related’s Hudson Yards and Brookfield’s adjacent Manhattan West development. Both projects are poised to irrevocably change the complexion of the far West Side and will have broad impacts on the character, commuting patterns, and infrastructure needs of their surrounding neighborhoods.
The first panel – titled West Side Mega-Projects – featured Cushman & Wakefield’s Bruce Mosler, Brookfield CEO Dennis Friedrich, Avison Young’s Arthur Mirante, and the Moynihan Station Development Corporation’s acting president Michael Evans. As a threshold matter, the panelists agreed that the expansion of Penn Station and development of Moynihan Station is key to providing access to both Manhattan West and Hudson Yards. Moreover, New York City’s demographic shifts are demanding infrastructure improvements. With fewer people driving generally and a third of all rail trips in the United States passing through Penn Station, it was encouraging to hear the panelists emphasize that relieving congestion is a matter of safety. (Indeed, their remarks in this context rang all the more prescient in the weeks after the panel as the City Council rejected Madison Square Garden’s request to extend its operating permit above Penn Station indefinitely.)
The panel acknowledged that it will be a challenge to attract tenants to the 28 million square feet of office space slated for Hudson Yards and Manhattan West. Yet many of the panelists – particularly Mr. Mirante – were optimistic, citing New York City’s aging office stock and enduring appeal to global companies. For example, twenty-six major banks are headquartered in New York City, yet only two own their own office towers (Bank of America and Goldman Sachs). There is also extraordinarily low vacancy rate (3 percent) in right now in Midtown yet (as of late June) 68 tenants were actively looking for 100,000 square feet of office space or more; 27 were looking for 200,000 square feet or more; and 10 were on the market for at least 500,000 square feet. So there is opportunity to attract those types of tenants for new construction developers – like Related and Brookfield – who can offer brand-new, state-of-the-art offices in large, contiguous blocks of space. Underpinning all of this – and of particular interest to us here at gbNYC+ – is demographics: Bruce Mosler (as he has previously on other Bisnow panels) stressed specifically that younger, “next generation” office users want to be in “top, efficient, attractive, and environment-friendly office space.” To that end, all of the Hudson Yards and Manhattan West towers plan to seek LEED certification from USGBC.
Brookfield’s Dennis Friedrich also provided some important details on his firm’s Manhattan West development. First, he stressed that Brookfield views the project as a critical gateway to Hudson Yards, yet also as a link to the historic Midtown office and retail core. For that reason, the company is bullish on the project’s prospects, and its residential component in particular as demographic shifts and attitudes about commuting patterns push younger workers to live closer to work. Mr. Friedrich also clarified that the platform currently under construction above the rail yards just west of Ninth Avenue will support public open space only. The two Manhattan West towers (pictured below) will, in fact, be anchored in bedrock. The platform should be completed next year; the towers and their 5 million square feet of office and residential space by 2016 or 2017.
The first panel concluded by addressing questions about what this flood of new office space might mean for the Times Square submarket, which has had much success in recent months in attracting technology industry tenants to office space that has become obsolete for many high-end corporate users. The panel agreed that Times Square will continue to stand on its own: the submarket will not compete with Hudson Yards for the types of large corporate tenants that are interested in headquarters space and branding opportunities (like Coach, SAP, and L’Oreal). Instead, it will continue to attract technology industry companies and law firms drawn by its lower prices and smaller floor plates.
Related’s Jay Cross joined the Empire State Development Corporation’s Ann Weisbrod on the second panel, which focused on the developer’s ongoing efforts to attract tenants to Hudson Yards and also offered a construction update. Moderated by Langan’s George Leventis, the panel also discussed future infrastructure improvements in and around the 26-acre project site.
Mr. Cross started out by comparing Hudson Yards to London’s Canary Wharf development, pointing out that today in New York City it is as expensive on a per square foot basis to build a new office building as it is in London (yet the developers, of course, get rent in pounds). He cautioned the industry that rising construction costs are a major issue for New York City: developers like Related can only drop asking rents so far until they hit cost. For a tenant’s existing landlord, renewal rents can drop as low as necessary in order to close the deal.
Construction on Hudson Yards is well on its way. Decking work over the railroad tracks will start in January of 2014. Mr. Cross noted that this early work will be tricky because it occurs at the eastern end of the site where crews can only work on weekends. This part of the site is called the “throat” and is where multiple tracks converge into those that continue east into Penn Station. After the Coach office tower is delivered in 2015, the eastern section of the decking will be completed. By 2017 two residential buildings and their accompanying retail spaces will come on line at 30th Street and 10th Avenue and 33rd Street and 11th Avenue. Mr. Cross emphasized that the timing is key because prospective tenants – neither office nor residential – want to move into a construction zone.
Related also has concerns about vehicular traffic around the site – particularly from the Lincoln Tunnel approaches and access into the Port Authority Bus Terminal. Ann Weisbrod from the Empire State Development Corporation drew some laughs when she said – quite seriously, and accurately – that the best way to deal with buses at Port Authority is to “keep them in New Jersey.” Of course, that begs the question of how those stranded workers would get into Manhattan. Her solution? Extend the 7 train from its planned terminus at 34th Street and 11th Avenue to the Secaucus Junction rail station. But doing that – or building Amtrak’s planned tunnel under the Hudson, dubbed the “mini-ARC” – would take significant political leadership at every level, along with a major financial commitment from the federal government. We have argued here that the best way to push this forward is to cast infrastructure needs as a matter of national security – that point wasn’t made during the panel. But it was refreshing to hear the panel stress that these improvements are essential to the future of the West Side.
Bisnow’s events are always informative with great networking to boot – we’re looking forward to the fourth annual Sustainability Summit on August 27 at the New York City Bar Association. You can register for that event through this link.