The Theater District’s Second Real Estate Act
If you're older than 30, you probably remember the rebirth of Times Square and the Theater District, starting in the '90s. But it wasn't the first time the area's seen a seismic shift—for better or worse.
So it is with the Theater District, which sits on land whose original deed belonged to the Astor Family, says New York Historical Tours director Kevin Draper (snapped on West 44th Street with Eastern Consolidated principal Adelaide Polsinelli).
As Manhattan's grid worked its way north in the mid-1800s, the first widespread business in the area, Kevin told us on a recent walking tour, was the selling of horse-drawn carriages and horses. The area was even called Longacre Square, after London’s prominent row of carriage dealerships.
It wasn’t until the 1890s that theaters began coming onto the scene in Midtown near Broadway. Oscar Hammerstein I was the first investor to realize the area would be a great fit for theaters. It wasn’t arbitrary, Kevin says, but visionary: The city’s middle and upper classes were moving further uptown, and so were the newspapers (like one you may have heard of that a certain bowtie-shaped crossroads was named for).
This meant productions would have an easier time getting reviewed. Restaurants, hotels and the swirl of energy that defined the area in its original heyday, which Kevin pegs as the teens and ‘20s of last century, would soon follow.
But the neighborhood would decline, at first owing to two factors, according to Kevin: The Great Depression and the advent of movies. It wouldn’t fully recover for many decades. Adelaide remembers what 42nd Street was like in the ‘80s, when she had her first real estate job in the area. She used to walk in the street, with traffic, rather than get too close to the junkies and vagrants that lined the sidewalks in those days.
What a difference 30 years makes. Adelaide says ground-floor retail rents on that very stretch of 42nd Street, between 7th and 8th avenues, now average $2,300/SF (and the ask is about the same in the Times Square “Bowtie” itself, around the corner).
It’s not hard to see why: according to Adelaide, half a million people are on the sidewalks of the Times Square area on the busiest of days, around the holidays in December. And that’s up from 350,000 just seven years ago, she points out.
Ready for your head to spin? The immediate area’s got 19 subway lines that serve 89 million riders a year, 170,000 office workers, five Fortune 500 companies, 66,000 residents, over 17,000 hotel rooms, 50 million visitors a year, and $1.7B in annual retail sales, per numbers supplied by Adelaide. We’re talking about an area of just a few blocks, here.
How’d it go from boom to bust to boom again? Kevin says a lot of the credit belongs to former Disney CEO Michael Eisner, who grew up coming to see theater in the area and pushed for Disney to invest heavily in its revitalization, starting in the ‘90s.
Disney restored the New Amsterdam Theater, on that same stretch of 42nd where Adelaide, about a decade before, avoided the sidewalk for her own safety. The New Amsterdam would host The Lion King starting in 1997—a production Kevin says helped “save Broadway” with huge ticket sales that helped convince theatergoers that they could come to the area, have a good time, and get out safely.
A little ways down the block from the New Amsterdam—though not as far as it once was—sits the Empire Theater. You read that last sentence right: The 7.4 million-pound structure was physically moved 170 feet west in 1998 for a 25-screen movie theater and hotel project.
Macro Consultants founding principal Michael Fromm was the project executive for the team that moved the theater. He tells us it took about a year and a half to plan, and just half of a Sunday afternoon to execute.
"It was exhilarating when we finally saw it in its new home," Michael says.
Exhilarating but complicated. He says the original plan to move the front portion of the theater didn't include the hotel that was eventually built. That, Michael says, was developer Bruce Ratner's idea and pulling it off meant redoing some of the plans that had been painstakingly made.
The historic theaters of the area have more often met with the wrecking ball than with the hydraulic jack. Kevin says the number of Broadway houses now stands at about 40—down from a peak of 65.
But even with fewer theaters, the crowds come. So much so that Adelaide says Blackstone, which owns 1740 Broadway, a landmarked office building on the Bowtie, recently applied to the Landmarks Preservation Commission to have the employee entrance moved onto a side street because workers had trouble getting in and out through the throngs of humanity.
The crowds of tourists haven’t stopped office buildings in the area from finding buyers. Eastern Consolidated’s Brian Ezratty and Scott Ellard teamed up to sell 311 West 43rd St, a 186k SF office building no less than three separate times in a five-year span, most recently in December 2015. The latest buyer was William Macklowe Co, which picked the asset up for $107M from Atlas Capital Group.
On the retail side, 1514 Broadway was home until the end of 2015 to the theme park-like Toys R Us flagship store. The rent, at $2,500/SF on the ground floor, $350/SF for the second floor, and $150/SF for below-grade space, was too much for the retailer to pay. The space is now being chopped up into smaller spaces with The Gap and Old Navy signed on to fill a portion of it.
If you look south from the former Toys R Us flagship, you’ll see One Times Square. That’s where the ball drops every New Year's Eve, but that’s not its only claim to fame. It’s also Manhattan’s largest office building with no office tenants, despite its prime location and iconic address. That’s because it fetches more by renting out billboard space—which Adelaide says can run as high as $5M a year in Times Square—than it could hope to get from office tenants. And since the signs block the light anyway, landlord Jamestown Properties just keeps the interior space empty, except for a Walgreens on the ground floor.
