News
SCRAM, OLD SPACE
September 25, 2012
| New York City building owners realize it’s time to get out of the commodity space business as Manhattan’s tenant profile changes. A panel of top landlords told us how they’re adapting during Thursday’s fourth annual Bisnow New York State of the Market. (Read previous coverage here.) |
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| It’s now all about the creative firms, like technology, new media, and advertising, says L&L Holding Co president Robert Lapidus— which has led to a strategic change. “We’re now focusing on specialty type space for the tenant experience,” he says. |
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| Savanna founder Christopher Schlank calls it “the Google effect.” In just the past 18 months, the tenant makeup of 386 Park Ave South (jointly owned with Monday Properties and trading hands to William Macklowe Co shortly) has totally changed, he says, with sectors like finance and law contracting. But don’t compare this to 2001: many of these tech companies have been around a long time and are making money. |
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| You’ve got functionally obsolete buildings offering lower rents, but that may not be a good business model. It’s about absolute need and a flexible leasing environment, RCG Longview managing partner Michael Boxer says. Demand will prove the economical viability of a building with tech bells and whistles—he’s interested to see how Edward J. Minskoff Equities’ state-of-the-art office building at 51 Astor Place will be received. |
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| The panel, which included Himmel + Meringoff Properties partner Leslie Himmel, also touched on the proposal to rezone the east side of Midtown. She says such a plan may not have a big effect for at least a decade or two. “But we should change zoning to stay ahead of time and replace what’s obsolete.” Very few sites are available for development, Robert points out, and many of the buildings are over 80 years old. (We suggest changing the zoning to seniors housing. An 80-year-old building with 90-year-old residents will seem young by comparison.) “Something needs to be done to remain globally competitive,” Robert says. But replacing an aging office building often isn’t a reality, given that you have to buy out tenants and knock down the building. |
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| Monday Properties CEO Anthony Westreich says no matter how cool he makes his firm’s iconic 230 Park Ave, a tech company won’t want to be in that business corridor (unlike the area surrounding 386 Park Ave South, which is teeming with creative tenants). Monday’s other core market—Washington, DC—is flat and he’s waiting to see what demand will be like after the election. But he points out that the fiscal situation overseas is a warning for what might happen if our country doesn’t fix things. "Can we afford to raise rates?" he asked. |
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| The political climate was a hot-button topic. “This country hasn't seen as much polarization since the Civil War,” says William Macklowe Co CEO Billy Macklowe. “It’s going to take a while to cycle out of this.” The only unification we’ve seen is when the US debt was downgraded and both sides agreed that our politicians were the ones hurting the country. Locally, there’s the unanswered question as to what will happen after next year’s mayoral election (and if 8 oz drinks are next on the list). |
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| The panelists with moderator extraordinaire Ross Moskowitz, a partner at Stroock & Stroock & Lavan. Leslie says she’s worried about the fiscal cliff. “We can’t say who will win, but taxes will go up... costs for the country, state, and city are going up. New York feels like it’s on fire, but we need to be mindful of global problems.” Robert jokes that he’s learning the Canadian national anthem just in case. |
