Manhattan's Latest Tower Heats Up Hudson Yards Race for TenantsBy
Moinian starts new skyscraper without tenant commitments
Related, Brookfield also building in the far west side area
On Manhattan’s far west side, where developers are adding millions of square feet of offices in new skyscrapers, the robust competition for tenants is about to get another entrant.
Joseph Moinian, an owner of properties including the W New York Downtown hotel and the Sky apartment tower, has started work on a foundation for a 1.8 million-square-foot (167,000-square-meter), 66-story skyscraper whose height will rival the Chrysler Building. His company, Moinian Group, has no committed tenants at the project, located at the corner of 11th Avenue and West 34th Street -- close to where Related Cos. plans four office towers and Brookfield Property Partners LP plans two. Tishman Speyer controls another two sites nearby, with one that’s slated to get a building designed by Bjarke Ingels.
The construction surge is transforming a decaying industrial expanse known as Hudson Yards -- from about 28th to 42nd streets, west of Eighth Avenue and stretching toward the Hudson River -- into a glittering enclave that’s expanding the borders of New York’s office districts and drawing some prestigious firms away from the traditional core of Midtown. The area’s developers are competing not only with each other, but also with new towers and revamps of older properties in lower Manhattan, where longtime Midtown tenants such as Time Inc. have relocated.
“There’s a wide range of options, geographically, coming up,” said Keith DeCoster, director of U.S. real estate analytics for brokerage Savills Studley Inc. Related, which started the boom with its $20 billion Hudson Yards project, “really staked a claim on the west side and put a lot of chips out there, and it seems to have paid off. Now the question becomes for the developers that are behind them, how do they compete over a limited number of tenants?”
Moinian Group, which has about $10 billion worth of properties, is entering the fray after Related has all but filled the 4.4 million square feet in two of its under-construction office towers, 10 and 30 Hudson Yards. Moinian and his investors are spending as much as $100 million to lay the foundation for 3 Hudson Boulevard and expects the building will have a main tenant committed before it starts to rise above ground, he said. He anticipates the skyscraper will cost about $2 billion to build, and he said he would complete financing for the remainder of the project once the anchor tenant is secured.
“We do feel confident, very confident, that the building will lease,” Moinian said. “That’s why we are putting this kind of money -- all cash -- into starting the foundation, to bite into the time” that it would take to finish the skyscraper.
Related, builder of New York’s Time Warner Center, is developing 28 acres (11.3 hectares) at Hudson Yards that will include retail, residential and hotel properties. When fully built out by 2025, the project will have 10.4 million square feet of offices, more than the total in downtown San Diego, according to a report Related commissioned. The developer, led by Miami Dolphins owner Stephen Ross, has agreements with companies including Time Warner Inc., Coach Inc., KKR & Co. and Wells Fargo & Co. to take space.
“Steve Ross has stated publicly more than once that he was aiming to build the office portion for a break-even result,” in anticipation of making large profits on the residential portion of the project, said Michael Cohen, tri-state regional president for brokerage Colliers International, which has done some leasing for Moinian at another office building. Ross has “done a lot better than break-even. Perhaps he didn’t even anticipate how quickly and successfully Hudson Yards would lease.”
Ross, in an interview on the sidelines of a real estate event last week, credited his project’s “city within a city” concept for Related’s relative success.
“The quality and the environment of what we’re offering is unique to any other project,” he said.
Brookfield -- developer of Manhattan West, just east of Related’s project -- has lured the law firm Skadden Arps Slate Meagher & Flom LLP from its longtime base at 4 Times Square.
Brookfield is on track with its leasing plans at Manhattan West, Chairman Ric Clark said by e-mail. The project and Related’s Hudson Yards have “different but complementary strategies and together are creating the most exciting mixed-use neighborhood in the country,” he said.
Tishman Speyer, which owns Rockefeller Center, has posted a website touting the Ingels design for its 2.85 million-square-foot tower, the largest in the entire Yards area, which will be on the other side of Hudson Boulevard from Moinian’s. The website provides a form for companies interested in the skyscraper to fill in. Bud Perrone, a spokesman for Tishman Speyer, declined to comment.
Tenants seeking New York offices -- particularly companies big enough to anchor a building -- have plenty of options even beyond Hudson Yards.
Lower Manhattan has 2 World Trade Center, the proposed tower that Rupert Murdoch’s News Corp. and 21st Century Fox Inc. considered then rejected in January in favor of staying at their Midtown headquarters. Traditional Midtown has several large vacancies in existing properties, such as 4 Times Square and the former Time & Life Building. Across from Grand Central Terminal, SL Green Realty Corp. is building a 1.6 million-square-foot skyscraper, 1 Vanderbilt. In Brooklyn, the partnership Greenland Forest City is working on plans for a tower that may be as big as 1.5 million square feet as part of the Pacific Park project across from the Barclays Center sports arena.
About 29 million square feet of offices are either under construction or proposed in Manhattan alone, according to an analysis by Savills Studley. Of that amount, 23 million square feet remain unleased. That’s equivalent to more than eight Empire State Buildings.
“As you get into 2017-2018, there’s a lot of different options out there,” DeCoster said. “There are certainly frequent rollovers and lease expirations that are coming up, but we don’t really see a big spike in demand right around the corner.”
Rents in midtown Manhattan, unlike in areas such as midtown south or downtown, have yet to top the peaks reached during the last real estate boom. The average asking price per square foot for top-quality Midtown office buildings was $84.21 in April, up 3.9 percent from a year earlier but short of the 2008 record of $92.59, according to Cushman & Wakefield Inc.
If the economy were to turn sour, some developers may have to put off their projects, DeCoster said. Moinian, who ran into trouble following the 2008 financial crisis and restructured debt on several properties, has a total of 4 million square feet in development or completed along 11th Avenue, including Sky and the Atelier condominium building.
“It’s our time,” said Arthur Mirante, tri-state president of Avison Young Inc., the leasing broker for 3 Hudson Boulevard. Moinian is in discussions with potential tenants for the tower, one of them for about 1 million square feet, the other two for more than 500,000 square feet, and expects to land one of them fairly soon, Mirante said.
Moinian aims to complete the project in 2021. Plans call for a 1,050-foot (320-meter) tower overlooking the Hudson River, designed by Dan Kaplan of the firm FxFowle Architects LP, that would torque gradually to maximize exposure to sunlight. It will sit on a full block, with its main entrance facing Hudson Boulevard, a slash of greenery with fountains and a pedestrian promenade, and beside a canopy-topped entrance to the new No. 7 subway terminus.
The tower also will feature a pair of five-story LED video screens above the entrances facing away from the park, which will flash out “branding capabilities” for an anchor tenant as well as art and cultural programming, said Mitchell Moinian, Joseph’s son and the firm’s senior vice president.
Moinian is going up against three of the biggest and most sophisticated real estate companies there are, with extensive experience as office landlords and “very deep pockets,” said Cohen of Colliers. “I think he will have a higher burden of proof than the other three to show he has the wherewithal to deliver.”
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