A Man About Midtown South: William Macklowe on the Tech Influx

The building kind of looked—I don’t mean this in a disparaging way – it kind of felt like an old Helmsley building. That might be appealing to my grandfather, [but it’s] not appealing to the kids today.

Any surprises so far in terms of the type of tenants showing interest? 

Impact Republic is not really a tech company. They’re a private equity firm that’s a marriage of Hollywood and finance—so they have a big creative team that focuses on celebrity, and they use their finance team to invest and do deals. They love the build, and they wanted to be there, because they understand that this is where the energy is right now. I like that deal, because it was done with an old friend from my uptown real estate days, and I think it’s great that there’s a tenant who comes was a traditional Midtown occupant. We’re also starting to get traffic from a lot of VC [venture capital] and private equity firms that invest in these [tech] companies, because they want to be appealing [and] be in their backyard. But they’re all great. Everybody loves all their children.

When will Midtown South pricing plateau? 

It’s hard to say. It’s gotten very expensive, and, when you really look at the tech companies, there’s a limit to what they’ll pay in rent. There is a glass ceiling, and it’s a question of where you think that falls. I don’t know. I don’t know.

We’re renting ahead of plan, and we’re very comfortable with our pricing [between mid-$50s to mid-$60s per foot, penthouse excluded]. But there are a lot of other people who bought a lot of buildings at a much higher basis, and they therefore need to achieve a higher rent. At a certain point, there is resistance to rents with 7s and 8s in front of them.

What are your thoughts on Downtown? Is it the next tech haven? 

For years, Midtown South was the pricey alternative to Midtown, and we see where those rents have risen, have arrived. There are a lot of positive factors as everything comes to fruition, the realization of the west side and the trade centers opening, with different types of tenants, and the Condé Nast tenancy moving downtown is positively impacting the submarket’s dynamics. Any revitalization of DT is good for New York as a whole.

If you go a little bit to the east side, you still see the vintage buildings that appeal to the tech tenancy, and it’s really the last place where you can get rents in the low- to mid-$30s. There’s different bifurcations to the tech tenancy: There’s the younger companies that might be in a series A or B round (of funding), and then there’s the more mature companies that get to that $10 million to $15 million. They need bigger space, more permanent space, and they come back to Midtown South.

What’s next—for you and the market?

We’re very active investors, and we still have a lot of money to put out, so were looking, whether it’s Times Square South, Midtown South, Downtown or Brooklyn. We like to invest with very strong conviction.

Downtown is a very interesting spot, because you see the ease of proximity to Brooklyn, and you see what’s happened in New York residentially, where rents have risen. It’s crazy. So a lot of younger kids are priced out of those studio and one-bedroom apartments. And you see what’s happening in Brooklyn. Brooklyn is starting to take from New York. I think the Brooklyn office market is going to start to develop and grow quickly.

You have a six-year-old. What else do you like to do in your free time? 

My mornings are always reserved for my daughter. I love to have breakfast with her in the mornings. That’s a special time for us. I recently started kite-boarding, and I’m spending a lot of time on that in my spare time. I’ve always been a water kid. I grew up with surfing, and it just seemed like the next logical step.

What do you think looking back at your split from your father’s firm? 

As difficult a decision as it was, we’ve come a long way. My dad was a great instructor of real estate. He’s a great real estate mind, and a lot of the skills that I have—and the skills that the team has here and how we look at real estate—were taken from the privilege of the 10 years I had to be with him.

I just wanted to invest differently, and, at the end of the day, we wanted different companies. We’re focused now on more creative, different types of real estate, [not] Midtown, Class A glass and steal. And we’re having a lot of fun.