3 Ways Lower Manhattan’s Finally Starting to Reach its Potential
Lower Manhattan’s like a real-life Field of Dreams, says Cushman & Wakefield director Will Suarez: if you build it, they will come. Except Will says it’s more like: they’re coming—so build it!
Retail Is On Fire
At Bisnow’s Future of Lower Manhattan event, held Thursday at 180 Maiden Lane, the neighborhood's top players got into what’s getting built, and how it’s helping Downtown hit its stride like never before. Howard Hughes Corp senior EVP Chris Curry (snapped, right with CBRE vice chairman David LaPierre) calls the South Street Seaport Lower Manhattan’s future town center; not only for high-end retail, but also because of its acre and a half entertainment venue.
Westfield executive director David Ruddick says once the 365k SF of WTC retail opens, it’ll affect the whole experience of shopping in NYC and move the city’s shopping center of gravity Downtown. Throw in another 300k SF of new retail at Brookfield Place that Brookfield SVP Michael Goldban says is 95% leased, and you start to see what David means.
With those three big projects, David LaPierre says retailers are clamoring to get in—and if they can’t, he says, they’re happy to settle for getting in nearby. Even in places like Lower Broadway, retail rents are hitting $500 to $600/SF for the first time, says, and he says there are landlords asking $1k/SF in the area—a laughable price just a few years ago, he says.
The Development Paradigm Shift
Moderator Les Jacobowitz of Arent Fox (left, with Will) has lived in the area for 15 years, and he’s seen it go go boom and bust before. So he posed the question: what makes Downtown’s boom du jour different from those in the past?
Time Equities CEO Francis Greenburger puts it like this: this boom’s not just driven by demand alone, but by the evolution of the whole area. He cites Le District at Brookfield Place as a place his French friends go to get fine French cheeses. It’s the kind of thing there's never been before in the area, and it’s part of catering to a younger, hipper mix of folks living, working and shopping there.
Speaking of shopping: Town Residential managing director Ari LeFauve compares the South Street Seaport area to the Meatpacking District in the way it’s being reborn with old and new building stock. But there’s one key difference, he says: zoning at the Seaport allows high-density new residential projects, unlike in Meatpacking.
Given that more storms like Sandy may happen, why is there so much demand to live by the waterfront? As Paladino & Co CEO Tom Paladino puts it, the last few years have seen a paradigm shift, where waterfront parks and piers are now seen not just as infrastructure to protect the shoreline but as amenities to enjoy that can also help protect it.
And that’s not the only place there’s been a paradigm shift. Silverstein president of WTC properties Janno Lieber tells the tale of how the massive trading pits originally built out at the new WTC buildings like Building Two have been gobbled up by TAMI tenants like Group M, which recently inked a big expansion to its already huge 515k SF spread at 3 WTC. It's not the use they were designed for, but we've heard that's sometimes a good thing in today's real real estate world.
Offices Are Attracting Huge Tenants
Newmark Grubb Knight Frank EVP Hal Stein points out that the culture of Downtown is changing, citing Saks Fifth Ave’s HQ move to the area. But Hal also notes that pricing’s a factor, too: Class-A office rents in the Financial District are around $61/SF, Hal noted, while these days you’re looking at $86/SF in Midtown—and that’s in addition to effective rent savings from incentive programs.
As MHP Real Estate Services CEO Norman Sturner points out, the TAMI crowd likes the light and air that you can get when there’s water on three sides. Careful to say that he’s not knocking Midtown, Norman says at MHP’s office on Park Ave, it’s “street, street, street, street” in every direction, whereas Downtown you only have to walk a few blocks at most to get lots of direct sunlight and waterfront views.
Time Inc VP Donald Hickey says the big floor plates at Time’s new HQ at 225 Liberty let them work with Unispace global design director Brian Tolman (also a speaker) to maximize collaboration and break down the “silos” that can divide departments by floor. And the silo between office and residential is breaking down too.
Here’s a zinger of a stat: Fosun Property Holdings managing director Erik Horvat says Lower Manhattan had just 5,000 residents in 1960. Now? 65,000. He says that just makes it a more attractive office market for those who prefer to cut long commutes out of their routines.
Asked by Rosenberg & Estis member Michael Pensabene, who moderated, whether Lower Manhattan’s office market had any real competition, Norman may have said it best: areas like Jersey City or Brooklyn may pull some tenants, but if you’re doing international business, your letterhead had better say New York City. Folks in Asia can’t even find the boroughs. Snapped: Michael, Norman, Hal, Erik.
Reonomy VP Charlie Oshman gives a presentation on what Reonomy can do to simplify research. He says Lower Manhattan had about 1,500 construction and building permits valued at almost $700B this year alone. Charlie says that doesn’t even include projects started before the beginning of 2015.