News
WHAT'S UP DOWNTOWN?
July 20, 2011
| The transformation of the World Trade Center site has been “a piece of cake,” Silverstein Properties CEO Larry Silverstein joked to a sold-out audience of 250 (who obviously wanted a slice) at Bisnow’s “The World Trade Center and the Future of Downtown” event at 7 WTC this morning. |
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| We’re beginning to see a quick metamorphosis Downtown, and the impact on values is just beginning, says Larry. “It’s nothing short of extraordinary.” The site will be as impactful—if not more—as Rockefeller Center was to NYC in the ‘30s, he adds. (Perhaps Liz Lemon would consider a move Downtown for a 30 Rock spinoff.) |
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| Tenants want to attract and retain the best talent and recognize that they need modern buildings to do it, says CBRE NY Tri-State region CEO Mary Ann Tighe, who recently was part of the brokerage team that brought Condé Nas t to 1M SF at 1 WTC. Over 300 firms have moved Downtown from elsewhere since ’05, and diversification of the tenant base will continue. “The biggest issue is that people haven’t been here,” she said, and when they finally visit, “they’re discovering a whole new world.” Bonus: workers can sleep in a little later, since Downtown offers closer access to employees who live south of 14th Street in Brooklyn and in Hoboken. |
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| Another challenge for CondéNast was the amount of visitors and deliveries it receives—it’s more than most tenants, says Cushman & Wakefield vice chairman Tara Stacom, who repped ownership in the lease. The brokers had to work through the accessibility of the site with the tenants (which took some time) but discovered that WTC will be readily accessible. Whenever she does tours, prospective tenants call for hour appointments, she says, then stay for two and a half. “They don’t want to leave the site,” she says. Like 1 WTC and 4 WTC—both are halfway leased two years before delivery—she believes most of the WTC buildings will be fully rented at opening. |
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| Port Authority of New York and New Jersey exec director Chris Ward says that PANYNJ is still working on a deal with Westfield Shopping Centers to bring more destination retail downtown, and he thinks it will be successful. “Westfield is an aggressive view of what can be done,” he says. Retail will be hip and cool, adds Tara, pointing to Duane Reade’s new digs at 40 Wall St. It’s not your mother’s drugstore—think hairstyling, sushi bar, and iPad and cell phone charging stations. But with 4,000 hotel rooms and 10 million annual visitors (six million for the memorial and museum alone), how will the site handle traffic? Chris points out that the WTC will be a “city within a city” and that the DOT is coming up with a new street plan while security around the site will moderate demand. |
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| What about the impact of all of NYC’s other planned developments, like West Side Yards? The panelists (with moderator Jonathan Mechanic—real estate chair of Fried Frank) aren’t sweating it, despite the 90-degree heat outside. The ability for tenants to be the first into a changing neighborhood, the economic benefits, and mass transit is incomparable, Larry says. And NYC needs all these developments, adds Mary Ann. We’re locked in a global competition for business, and major tenants aren’t going into boutique buildings. The average age of office buildings: New York, 71; London, 58; and Shanghai, 10. But it’s hard to develop here, she says—thank landmarking and downzoning to reduce density. |
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| The site not only comes with new buildings, but plenty of lessons. “If you really believe in something, don’t listen to the naysayers… just get it done,” says Larry, who had plenty of experience battling the negativity before the development of 7 WTC. “The site has been defined by what hasn’t happened,” adds Chris. “But it’s not going to be anything anyone told you it would be, like a political message. It will be your space and how you take it, not any one thing.” Mary Ann (an art historian in a former life) likened it to seeing a painting in a photograph, then real life. Being on site and in the buildings is transformational, she says. |
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| But Downtown’s not just about the 10 million annual visitors, according to Liz Berger, prez of the Alliance for Downtown New York. There are now 56,000 residents living in Lower Manhattan (including Liz for over three decades—we’ll call her an early adopter), more than double since the 9/11 attacks. Of these residents, more than 30% walk to work, so a live-work-play environment is critical, she says. And the majority of them are families. |
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| Now national retail chains and international fashion tenants— who left in the 9/11 attacks’ aftermath—are taking another look at the market, says The Lansco Corp’s EVP Robin Abrams. This week, she closed a deal with an international childrenswear company, which looked at multiple locations around Manhattan, including the Madison Avenue and 86th St corridor. Its pick? Chambers St. Downtown’s drawing a much broader mix of retailers, and it will be telling who takes Borders’ (RIP) former space at 100 Broadway. |
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| As a landlord, it’s time to take advantage of all of these quantitative factors, says Brookfield Office Properties VP David Cheikin, who notes the firm is putting plenty of money down (including a $250M retail transformation at the World Financial Center). Current Downtown landlords have to keep pace with new construction and make sure their buildings are destinations—and the interest Brookfield is seeing from non-Lower Manhattan tenants is motivating. “We’ve never had more paper go across our desk,” he says. And many of these are tenants he never expected to be sniffing around Downtown. |
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| Forget about the old adage of location, location, location, says CBRE EVP Brad Gerla—now it’s all about quality, quality, quality. For many buildings, this means LEED certification. “The proof is in the pudding” from activity the market’s already seen, like 7 WTC (LEED Gold). When the project delivered in ’06, it quickly reached 75% occupancy, and now’s at 95% occupancy with plenty of interest in the last three floors. Brad, who also reps Silverstein at 4 and 3 WTC, says the latter (just coming out of the ground) has seen tremendous activity as well. Overall, he’s doing at least one tour a day at the WTC site (and we must commend him for avoiding awful hard-hat hair). |
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| The panelists with moderator Carl Schwartz—real estate chair at Herrick Feinstein. |
