Lendlease Americas CEO Denis Hickey On Living Shorelines, Building A $1B Life Sciences Pipeline
With New York City facing the possibility of its sea level rising between 5 and 11 inches in the next decade, developers are beginning to think about how to future-proof new construction.
At Lendlease’s upcoming development in Brooklyn’s Greenpoint neighborhood, 1 Java St., global Chief Operating Officer and Americas CEO Denis Hickey believes the company has found a solution. The development along the East River will feature a “living shoreline,” made up of biodiversity-friendly materials and plants, which allows for water to move up and down the site rather than running into a concrete revetment wall.
Bisnow spoke with Hickey about Lendlease’s future plans for climate-forward building solutions, as well as his firm's recently announced joint venture with Canadian investment firm Ivanhoé Cambridge to invest $500M of equity into life sciences projects.
This interview has been edited and condensed for clarity.
Bisnow: New York City obviously has a fair amount of waterfront properties. Why aren’t we seeing more projects like 1 Java St.’s living shoreline?
Hickey: I think it's about a developer- or city-led approach when it comes to how you want to design the interface with the water. We've done a lot of waterfront development around the world, and we always try to embrace the water and make the tidal flow of the water a natural part of the site. We work with cities and agencies to make sure that we meet all the code requirements. Somebody else may choose to do a different form. I think in terms of encouraging best practice, New York City could be looking at solutions outside of New York City, and how we bring those to New York City is one way of doing that.
Bisnow: Beyond the living shoreline, are you looking at introducing any other kind of climate resiliency technologies or designs?
Hickey: We’re looking at putting different heat usages into buildings. So: How do we actually use the Earth's core to do thermal heating across the building? We’re looking to do that in 1 Java, if we can — basically making sure that we have all renewable energies as a source of energy in the buildings.
As a company, we've made a commitment to sustainability, we’ve got what we call our “mission zero targets.” We’ve come out and publicly stated that we are looking to be net carbon neutral by 2025 and absolute zero by 2040, which effectively means that everything that we do will have an absolute zero impact on the environment from a carbon neutrality point of view.
To achieve those targets, we need to change the way in which we design, manage and construct buildings right across the world. So: How do we think about energy use? What materials are put into a project? How do we move away from materials that are carbon-generating? Can we use different forms of concrete that [generate] less carbon when they’re manufactured? Where are those materials sourced? Have those source materials actually been made in an environmentally friendly way?
A Lendlease spokesperson clarified that Denis Hickey’s reference to net carbon neutrality by 2025 refers to the energy that Lendlease can control.
Bisnow: I want to talk a little bit about life sciences. Boston, San Francisco, San Diego are the big three, and you've listed these as markets that are interesting. Do you see New York as the type of market that can even begin to approach these other cities in terms of life sciences over the coming five to 10 years?
Hickey: Currently San Francisco, Boston and San Diego have been the primary markets, but New York [and] New Jersey is a market that has a lot of potential for life sciences product to be developed.
Life sciences want to be around big centers for innovation with regards to medical and science, around education and around venture capital sources. New York has those three elements that really give us the ability to be an attractive life sciences market moving forward.
We've seen some pockets on the Upper West Side and on the Upper East Side, as well as other parts of Queens, which has access to transport and its access to the land that can basically facilitate that style of development.
We've already bought a site and we're into development on a site in Boston, 60 Guest St. That's a 320K SF development that's in production with us and Ivanhoé Cambridge. And then we've announced another $500M of equity, which is effectively a billion dollars to put into new projects. They’ll be a mix of new development or adaptive reuse development, on a site-by-site basis.
We have looked at a couple of projects that are down on the Lower East Side and on the Upper East Side. They've tended to be located around medical and healthcare institutions. Of the sites we've looked at, some are existing buildings for reuse and some could be ground-up development.
Bisnow: How do you see the health of New York City's multifamily development market right now?
Hickey: The result of the pandemic was to really shut down lots of businesses. Entertainment and sport was shut down for a good 12- to 18-month period. People in dense, large cities tended to move out of the cities as a result of that — we saw that across the globe, here in New York and in San Francisco, in parts of Boston, even in London. As the pandemic has started to subside, and as people are getting used to living with Covid, we're seeing the return to the cities because of the lifestyle and the activity that big cities give you.
I think we're just starting to see the early stages of people returning. The New York City market in multifamily has rebounded really strongly. That's why we were so keen to buy 1 Java, which is a large, 800-unit multifamily project. We see rents now coming back above pre-pandemic levels — they're almost getting back to record-high rents — and that's a result of demand coming back into the city. And we see a lot of strength in the multifamily market moving forward.
Bisnow: As you just said, rents are getting to higher than pre-pandemic levels in New York City. I'm curious if you think there's still a need for market-rate development, as opposed to more affordable housing.
Hickey: It's all relative. I think what we've got to do as a community, and as a society, is to put more product into the affordable part of the segment. It's not creating the ultra-ultra-luxury, it's actually putting more product into the mid-market. [At] 1 Java, 30% of our product will be dedicated to affordable housing. The rest will be market housing. I think you're gonna see more of that sort of split as new buildings come on.
Bisnow: There's tension around the future of New York real estate because of the expiration of the 421-a tax abatement. Are you already looking for new development sites for multifamily, despite the political environment?
Hickey: 421-a is an important scheme to be able to facilitate and deliver affordable housing in the city. So with 421-a expiring and there being no replacement, there's a gap in terms of being able to deliver affordable housing. We need the economic stimulus to be able to deliver. For new projects, the issue for us [will be] how do you underwrite those new projects if there is no 421-a scheme to facilitate the development of affordable housing? So I do think it's up to the city and the state to accelerate their thinking around whatever the solution is to 421-a.
UPDATE, MARCH 17, 5 P.M. ET: This story has been updated to include a clarification from a Lendlease spokesperson.