Migration to Hudson Yards Predicted
The West Side of Midtown has increased its presence in the commercial real estate market within the past 20 years. The market now boasts a vacancy rate below 10 percent across all assets.
“To understand this market, it’s important to view it in the context of the history of the last 25 years,” explained Mitch Arkin, an executive director at Cushman & Wakefield. “In the ’80s, the market started pushing west with the development of Carnegie Hall Tower, the Equitable Building, 787 Seventh Avenue, followed by 1585 Broadway, 1540 Broadway, 750 Seventh Avenue, Worldwide Plaza, 1745 Broadway [and] Metropolitan Tower. Those buildings all brought Eighth Avenue and Broadway north of Times Square into Midtown.”
“In the early 2000s, residential development began to proliferate, particularly along 10th Avenue and Eighth Avenue, including some side-street development,” he added. “Today the entire area is booming, flanked in the south by the Hudson Yards and Brookfield Properties’ development along Ninth Avenue and to the north with the Durst Organization’s new residential project to the west of the Helena and Extell Development’s tower on 57th Street.”
“This area is attractive to large corporate anchors due to its proximity to Midtown yet its hip feel, and smaller tenants have been attracted to the relatively low rents,” he added.
The new buildings can achieve rents in the $80s and $90s, Mr. Arkin said. Older converted buildings hover around the high $30s and low $40s.
“All of the buildings on 57th Street with views of the park have seen their rents increase, $80 to $100 [per square foot],” explained Michael Cohen, the president of Colliers International’s tristate office. “Those rents were unheard of during the last recession.”
“I think [the future] will be mostly flat,” Mr. Cohen added. “I’m going to make a prediction—and this is general to the Midtown market, not isolated to Midtown West. We will see one major Midtown tenant migrating out of Midtown to Hudson Yards or the Financial District.”
“There have been rumors about L’Oreal,” he added. “Someone is going to fill those buildings on the Hudson Yard. Someone will move to the Coach building. Just like Condé Nast.”
Mr. Arkin, on the other hand, has a slightly more optimistic prediction, noting that the “West Side is continuing its aggressive expansion unabated where there continues to be the ability to assemble land for large-scale residential and commercial development.”
Near the end of the spring, Boston Properties placed the final beam in its 1,100,000-square-foot office building at 250 West 55th Street. Leasing efforts are currently underway to fill the building before its opening in 2014. As of now, two law firms have anchored the building, taking close to a half a million square feet.