Like the westward expansion that gripped the nation during the early to mid-1800’s, the expansion of Midtown Manhattan offers the city’s commercial real estate pioneers a modern crack at manifest destiny.
The trajectory of Midtown’s new building stock over the last seven decades tells a story of westward expansion that most recently struck Midtown West with the Hudson Yards development project.
“Hudson Yards really is the last frontier,” said James Delmonte, principal and vice president of research at Avison Young. “Firms are looking for newer product and larger floor plates, largely because there really is no available land on the east side.”
A new report from Avison Young shows that the new building stock that erupted along Park Avenue beginning in the 1950’s steadily pushed westward – to Sixth Avenue, Seventh Avenue, then Eighth Avenue – as decades passed.
The latest push is happening on the far West Side, the site of Hudson Yards, where in December Related Companies broke ground on a 47-story, 1.7-million-square-foot tower expected to cost $1 billion, the first of what will be a string of buildings to rise at the site.
“In the last 12 months, Hudson Yards has become a real thing, and it’s a function of tenants in the market looking for high-quality space,” said John Ryan III, a principal at Avison Young, which is the leasing agent for Joe Moinian’s 3 Hudson Boulevard. “The land at the West Side railroad sites allows for a construction platform that was untapped.”
Mr. Ryan credited the city and state for pushing the movement along, creating incentives for construction at competitive pricing and moving forward on the plans to complete the 7 train subway extension, which he called a “critical path” to development in the region.
Development, post-World War II and continuing through the 1960’s, started along Park Avenue as it developed into a premier business corridor, spurred by the rise of icons at 375 Park Avenue and 200 Park Avenue.
Traditionally made up of tenants from the financial sector, like JPMorganChase, UBS and Societe General, 78 percent of the building stock along Park Avenue was built between 1950 and 1970, the Avison Young report shows.
As corporate tenancy grew during the 1960’s and 1970’s, development moved from Park to Sixth Avenue, with the rise of “institutional-quality” buildings at 1271 (the Time-Life Building), 1285, 1290 and 1301 Avenue of the Americas leased by printing, publishing and legal services firms. The report states that 68 percent of the building stock along Sixth Avenue was built between 1960 and 1985.
Times Square saw a surge in development in the 1990’s and early 2000’s, with the appearance of Three, Four, Five and Seven Times Square, built between 1999 and 2004 and firms Conde Nast, Reuters and Ernst & Young each taking between 500,000 and 1 million square feet in the buildings. The analysis shows that 63 percent of the new building stock in Times Square/Seventh Avenue was built between 1985 and 2004.
“Nobody would have thought that that area would have become so corporate,” Mr. Delmonte said. “It’s not unlikely that we will see that kind of change at Hudson Yards.”
Eighth Avenue still “contains the largest concentration of the newest inventory in Manhattan,” where nearly 54 percent of the building stock was built between 2006 and 2013, thanks in part to some high-profile projects and leases.
Hearst Publications redeveloped its headquarters at 959 Eighth Avenue; the New York Times relocated from Times Square to its new building at 620 Eighth Avenue; Proskauer Rose and Microsoft signed leases at 11 Times Square; and pre-leasing activity at 250 West 55th Street has been strong, with 50 percent of the property leased.
But that development is likely to fall off, as space dries up and companies look to the west as the new land of opportunity, Mr. Ryan said, adding that the varying lease expirations along main corridors and zoning restrictions (barring a Midtown rezoning) don’t lend themselves well to new development.
“It’s developed to the maximum,” he said.