How Related Leased 7 Million Square Feet of Office Space at Hudson Yards
By Rebecca Baird-Remba March 19, 2019 10:30 am
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When Related Companies began searching for tenants to fill its first, 1.8-million-square-foot office tower at Hudson Yards in 2011, its leasing brokers had to convince companies to move to a neighborhood that was still a hole in the ground. The development firm was in the middle of decking over the 26-acre West Side rail yard and laying the foundations for the first phase of its sprawling, mixed-use development, which would eventually encompass 18 million square feet of commercial and residential space.
Stephen Winter, a senior vice president at Related who has led much of the office leasing at Hudson Yards, had to show CEOs that their workers would one day have access to dozens of casual lunch options and restaurants. One day, the hole in the ground would be home to a million square feet of retail—luxury retailers, fast fashion stores, food halls, five star eateries and interactive art exhibits. But none of it was built yet, and back then, asking tenants to lease hundreds of thousands of square feet at Hudson Yards was a gamble.
“Six, seven years ago, we had to break through doors and be as persistent as ever,” Winter explained. “It was a totally new place for everyone. It was a blank slate, an open piece of land with rail yards beneath it.” He gave “credit where credit was due” to the first crop of tenants who signed on to 10 Hudson Yards, including Coach, L’Oreal and SAP, which opened as the development’s first office building in 2016. Those firms “made the commitment to anchor these buildings when nothing else was complete.”
So, how exactly has Related’s leasing team rented nearly seven million square feet of office space at Hudson Yards?
It was really about figuring out what corporate leaders wanted.
“What we learned in the early days of selling it is that CEOs didn’t necessarily care about the scale of the project,” said Winter. “They just wanted to know how they could attract and retain the best people to work for them in New York City. So we set out to answer that question. We set out to build a city the size of Stamford, Connecticut.”
Andrew Cantor, a senior vice president for development at Related, explained that the trick was selling Hudson Yards as a neighborhood. There would eventually be apartment buildings, a park, a subway station, and several office towers.
“It wouldn’t have worked without a mixed-use strategy,” he said. “That allowed us to commit to construction across the eastern rail yard all at once. Being able to sell a neighborhood gave our tenants that certainty and gave them that live-work-play experience, especially for younger people who want to take advantage of the retail and have much less circumscribed office space.”
Stephen Ross, the chairman of Related, helped bolster the credibility of his $25 billion megaproject by promising he would move there, even though he could afford to live anywhere in the five boroughs. Ross, who’s 78 years old and worth nearly $8 billion, currently shares a penthouse with his wife at the top of Time Warner Center, another development he built that radically transformed a Manhattan neighborhood.
“The level of perseverance and commitment from Stephen, Jeff [Blau], Bruce [Beal] and Jay Cross—I think it resonated with tenants,” said Winter.
That confidence helped Related land its first tenant, Coach, in 2011. Two years later, the luxury fashion brand paid $530 million to acquire a 740,000-square-foot portion of 10 Hudson Yards. Asset management giant BlackRock landed one of the development’s largest leases at 847,000 square feet. It ultimately agreed to pay $1.25 billion over the course of its 20-year lease at 50 Hudson Yards, as Commercial Observer reported in 2017.
Of course, having an aggressive and experienced leasing team wasn’t all that Related had going for it at Hudson Yards. It also had billions of dollars in public support from the city and the state. Former Mayor Michael Bloomberg struck a deal to extend the 7 train from Times Square to the Far West Side and convinced the Metropolitan Transportation Authority to build a huge, spanking new subway station that opened at Hudson Yards in 2015. Governor Andrew Cuomo has pushed forward with the renovation of the Farley Post Office by Pennsylvania Station into Moynihan Train Hall, which will include new waiting areas for passengers, stairways to train platforms and plenty of food offerings and shops beneath a new skylight. A local nonprofit led the revitalization of an abandoned elevated freight track on Ninth Avenue into the High Line, a landscaped walkway that attracts millions of tourists each year. And the state is also expanding the massive Jacob K. Javits Center, a convention facility next to Hudson Yards, by 1.2 million square feet at the cost of $1.5 billion.
Related has also worked to create an amenity program that would help lure and keep tenants. Some of its office buildings offer restaurants and party spaces, others, like 50 Hudson Yards, will provide 300-seat auditoriums and in-house catering services for all of their workers. The development has a daycare center as well as a concierge medical clinic run by Mount Sinai.
Thanks to all these advantages, the development firm’s brokers have leased several million square feet of office space across four buildings—10, 30, 50 and 55 Hudson Yards. Of the four, only 50 Hudson Yards remains mostly unrented, because it won’t be complete until 2022. BlackRock will occupy the first 15 floors, while the rest of the 77-story building has yet to be leased. The other commercial skyscrapers have attracted a host of banner tenants. WarnerMedia took 1.5 million square feet at the 2.6-million-square-foot 30 Hudson Yards, along with investment firm KKR, Norwegian bank DNB and Wells Fargo Securities. The 1.3-million-square-foot 55 Hudson Yards has drawn big leases from law firms Boies, Schiller & Flexner, Cooley LLP and Milbank, Tweed, Hadley & McCloy, along with digital trading platform MarketAxess.
“I don’t think we ever dreamed of the tenants and the velocity with which we’ve leased all these buildings,” Cantor said. “We’ve basically 100 percent rented or sold of these buildings before they’ve opened.”
