At the northern end of midtown, where the skyscrapers abut Central Park, there’s a rarified realm called the Plaza district. Bounded, depending on whom you ask, by 54th and 64th streets, Park and Sixth avenues, this is where the kings among men work: the billionaires, the families with foundations, the private-equity royalty. It’s expensive, exclusive and only a few blocks south of the community of co-ops on Fifth and Park avenues. In good weather, the men walk to work. In bad weather, they’re driven.
The Plaza district itself is but a subset of the larger realm that is the midtown office market. Fortune 500 corporations and white-shoe law firms exchange sackfuls of money for 15 years tenancy on a nice floor high up in the midtown skyscraper forest. On the flip side is the downtown market, south of Chambers Street, where smaller-time firms have traditionally hunkered in drafty, prewar digs near Wall Street, and which has struggled to overcome first the recession in the early ’90s; then Sept. 11; then the recession after that; and then the recession after that.
“In today’s world, people prefer midtown to downtown,” said Dale Schlather, chair of the New York chapter of real estate group CoreNet Global and a broker at Cushman & Wakefield. “The main reason for that is people who are commuting into Grand Central station don’t want to go all the way down there.”
Such has historically been the power balance in the New York City office market. Far-fetched as this may seem, some real estate professionals predict that in 20 years, the balance will tilt in the other direction. Condé Nast is close to signing a lease for 1 million square feet in One World Trade Center (the former Freedom Tower), the anchor of a redevelopment project that looks like it might finally be on track; a project that will bring 10 million square feet of high-quality office space to an aging Manhattan office market; in a location surrounded by ever-more-successful residential neighborhoods in Brooklyn, New Jersey, downtown Manhattan and the Financial District itself; in a city whose center of gravity continues to shift southward. Some real estate professionals go so far as to predict that Lower Manhattan could become the new Plaza district, the most sought-after office market in the city, and by extension, the nation.
“Literally, we were talking about this in my office last week,” said Thomas Wright, executive director of the Regional Plan Association. “There’s a real possibility that at some point, its high-end offerings are going to be considered the most attractive.”
BY 2030, MAYOR Bloomberg will no longer be the mayor of New York City, Governor Cuomo will have come and gone and the World Trade Center development will presumably be complete. That completion will represent more than just a long-delayed victory over terrorism, bureaucratic bungling, construction hold-ups, and a terrible real estate market. It will also, arguably, represent the largest injection of new office space into the Manhattan market since the last time the World Trade Center opened, in 1972, with 10 million square feet.
In a Manhattan office market of 450 million square feet, that’s something of a proverbial drop in the bucket. And it may, like its predecessor in 1972, have some initial trouble finding tenants in a real estate market that is suffering for lack of demand.
But the new towers will have a major edge over time for one simple, compelling reason: They will be new. Right now, as in most downtowns, the average New York office building is about 60 years old, compared to an average of about 30 years in suburbs nationally, according to CBRE Econometric Advisors. New means office buildings with better light, greener features, better air circulation and fewer columns interrupting workflow. Those who can afford them generally choose them.
“If floors have a forest of columns, you are governed by the architecture,” said Mary Ann Tighe, CEO of CBRE’s tristate region and chairman of the Real Estate Board of New York, adding that tenants also put a premium on good light and air. “Where are you going to get that? In a building with punch windows that was built in the ’60s and ’70s, where basically the air gets re-circulated like you were on a long airplane flight all day?”
Larry Silverstein put it another way: “Let me tell you, we are spending about $20 billion. When you spend that kind of money, you do magnificent office buildings! World class in every regard! Iconic! With well-recognized architects! So the design is spectacular.”
As Lower Manhattan is reborn, the central midtown market ages, with few major development sites left: the lot of the former Drake Hotel at Park Avenue and 56th street; Boston Properties’ 250 West 55th Street; the Hotel Pennsylvania; and maybe the Roosevelt Hotel. The only looming rival for downtown could be the far West Side, which theoretically has a similar amount of square feet in the pipeline, assuming Moynihan Station and Brookfield’s Manhattan West project move forward. (Mayor Bloomberg cut a very ceremonial ribbon on Moynihan’s only fully funded portion this Monday – the expansion of a couple underground concourses.) And even then, the West Side will have only one subway line, to the Financial District’s 13.
The final harbinger of Lower Manhattan’s rise: the residential resurgence in surrounding neighborhoods, a resurgence that has pumped up property values in Soho, the West Village, Hoboken, Jersey City, Brooklyn Heights, Park Slope, Dumbo, Carroll Gardens, Boerum Hill, Fort Greene and the Financial District itself, and made Tribeca even more expensive than the Upper East Side.
“At the time of the Plaza district’s emergence, the Upper East Side and the, if you will, southern portion of the West Side were really the most prestigious places to live in the city,” Ms. Tighe said. “A number of these new emerging neighborhoods, whether Chelsea, the meatpacking district or the West Village, and parts of Brooklyn, are now the most prestigious places to live.”
Mr. Schlather made a corollary argument for the larger executive set.
“Right now, the decision makers in all the big companies tend to be boomers,” Mr. Schlather said. “The boomers were an urban-moving-to-suburban society. They tend to live in Westchester and Connecticut and therefore must commute to Grand Central Station.
“Gen X and Gen Y are more sustainable. They don’t want to commute an hour. It’s just not the way they want to spend their lives,” he continued. “They’re becoming a more urbanized culture. And New York is becoming more suburbanized. You’ve got Home Depot, Costco, all the amenities that used to be reserved for the suburbs. They want to live in Brooklyn, Hoboken, Chelsea, Tribeca, Soho and the Lower East Side, not in Westchester and Connecticut. Transportation from these areas to downtown is actually easier than to midtown. So when the decision makers are the next generations, it is likely that the importance of Grand Central to the decision makers will decrease relative to today. Advantage, downtown.”
Further, one could argue that, with the media company agglomeration in Hudson Square, the Whitney’s planned move downtown and even a 92 Street Y in Tribeca, the city’s entire center is drifting southward.
None of this even takes into account the impact of Sheldon Silver, who, with his “Marshall Plan” of rent subsidies at the World Trade Center and tax breaks for downtown tenants (along with hundreds of millions in direct state aid), is effectively helping pave the streets with gold–something that doesn’t become clear until they’re done paving in 2015 or so.
Ms. Tighe declined to discuss any aspect of her client Condé Nast’s leasing negotiations for space at One World Trade, nor would Condé Nast comment as to the role that its workforce location–which we imagine has a healthy presence downtown and in Brooklyn–played in its desire to move to Lower Manhattan.
But consider where the tops of the mastheads live. Graydon Carter: West Village. Anna Wintour: West Village. Stefano Tonchi: West Village. Brandon Holley: Red Hook.
“It’s going to go through,” asserted Larry Silverstein, of the Condé Nast deal at One World Trade. “They want it, the Port wants to get it done, Condé Nast wants to get it done. They signed a letter of intent. I see no reason it shouldn’t happen. Is it a harbinger? The first of many.”
Mr. Wright, of the Regional Plan Association, sees Condé’s imminent move downtown as a harbinger, too.
“In other words, what Condé did to Times Square is potentially what they can do to Lower Manhattan,” Mr. Wright said, referring to Condé’s move in 1996 to 4 Times Square, a move that helped kick-start the transformation of Times Square into Disneyland.
“What happens when the World Trade Center site is done?” said Mr. Schlather. “There will be a beautiful new transportation center, a beautiful memorial park, an arts center and a ton of new retail space to support the 50,000 or so workers who will be located there . And that blight of a hole is filled. All of a sudden that area, in the end, will be beautiful.”
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