Trinity Church boasts over three centuries of landownership in New York City, dating back to 1705, when Queen Anne gave a 250-acre land grant in what is now Hudson Square to the parish. Bounded by Greenwich Street to the west, Avenue of the Americas to the east, Houston Street to the north and Canal Street to the south, Hudson Square has more recently benefited from Midtown South’s increasing popularity with the creative class. Jason Pizer, president of Trinity Real Estate, spoke with The Commercial Observer last week about Trinity’s presence in the market, the evolution of Midtown South and the future of Hudson Square as rezoning stands to revitalize the neighborhood once again.
Mr. Pizer: One Hudson Square and 345 Hudson. One Hudson is 100 percent leased, and 345 has approximately 40,000 feet of space available. It’s about a 950,000-square-foot building, so pretty much close to 100 percent leased. Rents are in the high $50s. We’ve done a couple of deals elsewhere in the portfolio in the low $60s, so we’ve seen very nice rent growth over the past couple of years.
How would you evaluate leasing across your portfolio?
We have a 3 percent vacancy rate at the moment. Retail is 100 percent occupied, so leasing has been very strong over the past couple of years. Midtown South as a whole has been the hottest marketplace in the country for quite some time. The job growth is in the creative sectors. People refer to it as tech, [but] it’s not really just tech that we are seeing. We do see some tech companies, but to label it tech is inappropriate, it’s more creative. When I say creative, I mean new media, branding, advertising, TV, radio. Things like that.
How would you evaluate the overall state of the Midtown South market?
Depending on whose stats you read, Midtown South as a whole is [at] anywhere between 5.5 and 6 percent vacancy, which is among the lowest in the country. That and Washington, D.C., over the past market rise have been the hottest submarkets in the country.
We have tenants constantly inquiring about early renewal opportunities. People still think rent’s going to go up, and people are very happy being in the area, and so they want to secure their long-term or medium-term future.
Can you compare the market with where it was, say, 10 years ago? What has the transformation been like?
Well, 10 years ago we were still in that post-9/11, post-NASDAQ-implosion era, and the market was not very strong. It was definitely a buyer’s market back then. Tenants had a lot more leverage than they do today. Rents were considerably lower. Concession packages were higher. Free rent was higher.
Markets have blended in Manhattan. Madison Avenue used to be advertising, Downtown used to be insurance and financial services. Midtown South was dot-coms, tech startups—creative people looking for lower-priced alternatives. And that’s why they came to Midtown South. That’s completely changed.
There are no barriers anymore. We see financial services tenants looking at our portfolio and looking at Midtown South, which never happened before. We’re no longer a lower-priced alternative, [in which] people are looking here because the rent is lower. They’re looking here because it has become a desirable location for them. It’s the architecture. People like the loft-style buildings. The buildings are not very tall here, so you get a lot of natural light.
What were rents like 10 years ago? If we’re talking $50s and $60s today, what were they then?
Let me go back a little further than 10 years. You had a big spike when the dot-coms were coming around. They were playing with funny money. The line was, “We need 3,000 feet today, but by next week we’ll need 30,000 feet because we’re hiring 300 people a day.”
You had six people looking at the same space during that time, so we were doing deals in the high $40s. Then you had 9/11 and the stock market correction, and in ’03, ’04, ’05, deals went down to the mid-$30s with higher concessions. Then in ’06 it started to percolate again. Now we’re starting to do deals mid-$50s to mid-$60s across the range of our buildings. So if 10 years ago deals were in the low to mid-$30s, now they’re in the high $50s.
Do you think Hudson Square can become a full-fledged neighborhood in the ways Tribeca has to the south and the West Village has to the north?
I’ve been here since 1999, and to me, I think it’s possible, because the change I’ve seen from 1999 to today shows that that can happen. The big difference is there’s not much residential development in this area. With the rezoning and with the advent of residential development, which will happen in the next five years, absolutely I do. It will be a different scale, a different vibe, but I think it will have its own flavor—but I believe it will become a 24/7 neighborhood.
Is there anything else the area is lacking, other than the residential component you mentioned?
As part of our rezoning, there needs to be a school constructed and, of course, that is going to be a magnet for people wanting to live here. Once the residents are here, certain types of businesses will follow which currently are not here. A supermarket or some sort of food alternative. When I say food, I’m thinking of a Whole Foods or something like that. It doesn’t have to be that—just someplace where people can buy groceries.
Amenities you would think about wherever you lived, that you want to run out and get. A pharmacy—it took us a long time to get one, we finally got one at 345 Hudson. Alternatives. In terms of eating out, there are some nice alternatives in Pret A Manger and Hale & Hearty Soups. They’re starting to come, and a supermarket will follow shortly.
Does Trinity have ambitions to be involved in the residential side once rezoning happens and residential picks up? Is that something you see being involved with?
Actively involved in terms of investment and approval of design and type. In terms of becoming a residential operator and manager of units, probably not.
Can you elaborate on the time line and plan for rezoning and how you think it will revitalize the area?
I can’t speak to the time line in terms of what other owners are going to do [or] how quickly they feel they can bring stuff to market. But we think we’re going to do it in fairly rapid fashion. Duarte Square is something that is probably going to happen fairly quickly, and under the terms of the rezoning, there is a school there, so that’s going to be the first site to go. I wouldn’t be surprised if something happens there fairly quickly.
As far as our other sites, they’re going to be queued up in a deliberate fashion, but probably within the next two years.