Cushman’s Michelle Walker Knows Difference Between Agency and Tenant Reps. But Which Does She Prefer?

The 1412 Broadway representation—what have you learned from that experience?
Where do I start? Even though the market ebbs and flows—from whether it’s a tenant market or a landlord market—in New York the pendulum doesn’t swing as far as it does in other markets. So on some level, in certain sections of the city, the pendulum barely swings and landlords are always in control. And I’ve learned that landlords, because they have the opportunity, they have a tremendous amount of money that they’ve invested in product. So it’s, again, looking at it from a different lens. They have to do everything that they possibly can to protect themselves from losing money. In order to do that, they’re a lot more sophisticated in the lease process than tenants. Tenants are willfully unprepared. I think it’s more critical that tenants have very, very informed brokers. The more I learned, the more I’m like, “Tenants are out there like sheep on some level.”

How much space is available at 1412 Broadway?
It’s a 415,000-square-foot building, so it’s a big building, but in comparison to the 800,000-square-foot buildings it’s kind of a dwarf building in the Times Square South area. But of that space, when I originally started, we had about 11.5 percent vacancy. I’m happy that since August we’ve dwindled that down to about 6 percent. It’s been a very busy year.

Any recent deals that you can talk about? Notable tenants that have moved in to the building?
Sure. We were happy to sign Oberon Securities. Times Square South, where that asset sits, has historically been called the Garment District. The apparel industry is changing dramatically, and a lot of the apparel companies are moving because the rents are going up and their business is suffering. So that Garment District is now being renamed, just by most landlords, Times Square South. What’s happening in Midtown South is having such an amazing effect on the rest of the market. Landlords recognize, because that market is so tight and the kinds of tenants are moving there, they’re realizing, “In order for us to be competitive, why don’t we try to rebrand our product to make it look similar to this product? So it’s across the city and up ten blocks, but we can still make ourselves competitive.”

So they can make their buildings this kind of stripped-out, loft-like space that tech companies want?
Exactly, because they’re old classic New York buildings and they’ve got the floor plates. They had just traditionally dropped the ceilings instead of keeping the heights open. What a lot of landlords in that little section of New York are doing, including mine, they’re trying to find out how to draw some of those new dot-coms over. What they’re doing is that a lot of the small tenants that are in the building, they’ll just cut up the floors, so they’ll take a 15,000-square-foot floor and cut it up into five 3,000-footers or smaller spaces. Unfortunately, as those leases roll, landlords are not renewing, and they’re gutting full floors and opening up the ceilings. And so we’re actually in the process of doing the identical thing at 1412. We’re looking at gutting as many floors as possible, because it’s just easier to deal with one large tenant than it is twenty smaller ones. But the landlords are reacting to what’s happening in the market, and they’re making those changes.

Where are those smaller tenants going?
Good question. Just this week I’ve gotten four calls from tenants from adjacent buildings going, “I’m in 900 square feet across the street. Can you take me?” And I’m like, “We don’t have the space for you, I’m sorry.” We do still have maybe three or four small spaces under 2,000 square feet, but they all have activity on them, and they’re going to go fast. It’s a smart business move on the landlord’s part. Not that it’s a big, bad landlord—no. The landlord has invested hundreds of millions of dollars into their assets and they have to be self protective just like a tenant would be. For small tenants, you’re right, where do they go? A new market will sprout up somewhere for them.

Any idea where that might be?
I think they’re getting pushed farther west. Instead of Broadway and Seventh Avenue, a lot of those tenants, because it’s so much farther away from the center of the city and all the subway lines, Eighth, Ninth, 10th Avenues—there’s a lot of small space over there that’s still inexpensive, so they’re just being pushed even further west.