Advertising Spin-Off DDCD & Partners Moves to 17 State Street
Daniel Edward Rosen Dec. 20, 2011, 1 p.m.
Its partners had walked through one stuffy Art Deco lobby too many and had spent too much time contemplating how the company’s operations could be arranged in offices littered with bulky columns and, likewise, how company morale could be kept afloat in the cavelike environs cut off from light and air that they kept encountering.
DDCD had given its broker, CBRE executive vice president William Iacovelli, a simple mandate: find space in Midtown South. It was a request that Mr. Iacovelli was perfectly happy to comply with. For years, the neighborhood has been a draw for mad men and creative tenants alike.
But with Midtown South’s rising popularity, submarkets like Chelsea, the meatpacking district, the Flatiron district and Hudson Square haven’t necessarily become any easier for space takers to negotiate. Midtown South’s vacancy rate, in fact, is in the mid-single digits, making it the tightest market in the city, not to mention the country.
On top of that, the area’s stock of office properties is also among the oldest in Manhattan. So when a company is forced to peruse the leftovers, the choices often aren’t pretty. Traipsing for months from one uninspiring location to the next, DDCD’s principals believed that their dream of renting a loft-style office with funky appeal was beginning to dim.
“We walked through a lot of dingy lobbies,” Mr. Iacovelli said. “We saw some options that could have worked but it just felt like they would be settling rather than getting something that they felt would reflect and enhance their identity.”
Of course, there were more suitable options too. Higher end buildings like 414 West 14th Street and newly developed properties like 15 Little West 12th Street offered pristine space. But they came with a steep price tag. Other spaces that DDCD looked at weren’t built out and would have required the firm to shell out the capital and suffer the inconvenience of preparing the office for its occupancy, which can be a significant construction project.
“They wanted to save the time and expense of building out their own space so it was important to find an office that was ready for them to move in,” Mr. Iacovelli said.
Though it insisted on searching the market diligently, DDCD didn’t have the luxury of time either. The company was founded this year as a high-profile spinoff launched by executives at Interpublic Group, including John Dooner, a former chief executive of McCann Worldgroup, Interpublic’s largest unit. It incubated at Interpublic’s offices at 161 Avenue of the Americas, but pressure was growing for it to stake out on its own now that it was severing from the company.
Mr. Iacovelli had an idea: DDCD’s executives hadn’t been enthused to skip Midtown South and go downtown despite the district’s reputation as a low-cost alternative. Mr. Iacovelli had a feeling, however, that given the arduousness of their search so far, if he could deliver the perfect space in lower Manhattan, the firm might be swayed.An address quickly jumped into his mind. Seventeen State Street, a 550,000-square-foot-office building owned by the real estate company RFR Realty, began the year with tens of thousands of square feet of vacancy.
But the building has been attracting deals in such a steady succession that buzz about its success has for months filtered through the market.
Located at the southern tip of Manhattan, where its curved facade offers a panoramic embrace of the waterfront, the property feels removed from downtown’s tightly coiled commercial corridors. Yet it is well tied to public transportation, with subway access in front of the building and the FDR Drive nearby. Burdened with vacancies during the depths of the recession, the property actually fell into special servicing in recent years. But RFR held on and has worked to bring the building back to what it feels is its rightful place, a high-end boutique office with appeal to a host of office users.
To help its efforts, RFR redid the building’s plaza area and made other improvements, such as cleaning its metal and glass facade.
“We polished the gem,” said Steve Morrows, a top leasing executive at RFR who normally manages the firm’s Midtown portfolio but whom the company brought in to oversee the property’s lease up.
In marketing materials, RFR Realty positions 17 State Street as part of a signature collection of assets, alongside its highest profile properties the Seagrams Building and Lever House in Midtown.
“It was a building that immediately caught our attention,” Mr. Iacovelli said. “You get a sense of what a high-end property it is.”
When Mr. Iacovelli showed it to DDCD, the company’s executives were enthralled, scheduling tour after tour to show the space to all of its partners and executives. Whereas in Midtown South the firm had often encountered tepid interest from landlords comfortably in possession of the upper hand in leasing negotiations, RFR was refreshingly eager to accommodate the company.
“We want this building to be a place for the advertising industry just as it has appealed to financial and law firms,” Mr. Morrows said, noting that DDCD is the first advertising company to come to 17 State Street.
A lease was quickly drawn up for DDCD to take the building’s entire second floor, a 13,100-square-foot space that RFR had previously outfitted with prebuilt offices. Rent in the deal, like for most space in the building, was in the $40s per square foot. The transaction struck a balance between quality, convenience and affordability that DDCD had begun to fear was unattainable. Had DDCD waited much longer, the opportunity may very well have vanished.
Mr. Morrows, who leases 17 State Street with RFR colleagues AJ Camhi and Ryan Silverman, estimated that about 75,000 square feet of deals have closed at the property so far in the 2011. He said he expects another 65,000 square feet of deals to be finished by the end of the year, taking the property’s once bulging vacancy to nearly zero.