How Midtown South Went From Pimps And Prostitutes To Trendy And TAMI
At the turn of the century, Midtown South (however you choose to define it) was in rough shape. Many office buildings were vacant and its parks were rundown and unsafe.
In the years that followed, developers and the city helped the area get back on its feet, and it’s now what the panelists of Bisnow’s Future of Midtown South event call the world’s pre-eminent business address, with one of the country's lowest vacancy rates and most diverse economies.
Although she was too young to experience it personally, HFZ Capital COO Laurie Golub (center) says the area around Madison Square Park was a “wasteland.” But considering its excellent travel options on all sides, it really doesn’t make sense why the neighborhood was ignored.
A major spark, Naftali Group CEO Miki Naftali (right) says, came with the revitalization of the parks themselves. Now cleaner, safer and greener, the parks attract families and professionals and boost condo prices to the point they can trade for 20% to 25% more than non-park buildings.
Recalling the struggles of his grandfather, Rudin Management Co CEO Bill Rudin (right) believes Midtown South’s success is perfectly exemplified by his grandfather’s legacy, 41 Madison Ave, with its mix of professional services, TAMI and FIRE tenants, all drawn to a cool, hip feel, affordable, well-designed buildings, new amenities and, most importantly, like-minded companies.
The building, he adds, has the infrastructure, the views and the loft-like space that help it stand out on the market and support these new tenants' basic bandwidth needs.
Rudin Management VP Robert Steinman pointed to Valley Bank, which relocated all the way from Silicon Valley because the types of companies it services—tech giants like Spotify, Buzzfeed, Amazon, Facebook, LinkedIn and Twitter—all have offices in the area.
“And these kinds of companies boost the residential sector,” he says. "They’re usually the ones that want condos near their workplace and, more importantly, can afford them.”
Bill says he’s spending $15M to renovate 41 Madison’s lobby to further attract and retain tenants. This kind of upkeep and modernization is mandatory, as these new Midtown South tenants want an office experience that feels new and welcoming.
One way he’s tried to keep his spaces modern is checking out innovation like co-working. Rudin Management was one of the first to give CEO Adam Neumann a chance, he told the crowd, and that only came after Hurricane Sandy filled 110 Wall St’s basement with 500 gallons of water. Bill decided he’d rather take the chance to revitalize the building than tear it down and start anew.
Now, he says, 110 Wall has the company's first WeLive location (and Bisnow’s HQ), and, more importantly, WeWork has 11 locations throughout Midtown South—another sign, he says, of the kind of tenant gravitating toward the area.
“Although you have to pay more of a premium with WeWork, it provides a flexibility that’s vital to accommodate smaller companies' growth,” Bill said, "and has plenty of small touches like free coffee and beer the new, younger talent loves."
Another avenue for success Robert is to look outside the hot zones. Tribeca, Union Square, Flatiron, Chelsea and the Meatpacking District are boasting availability rates below 8%, but their popularity is helping their neighbors.
“Some neighborhoods become hot because the places where they actually want to be are too expensive or crowded,” Robert said, snapped above with Flatiron Partnership executive director Jennifer Brown.
A third option, Miki says, is converting the neighborhood's older offices to residential space. With new working habits, there are some older buildings are just not fit to operate as offices. Robert said Rudin’s conversion of the old St. Vincent's Hospital into housing, Greenwich Lane, was in high demand.
What will keep demand high and Midtown South vibrant, Robert insists, is for developers and the city to continue supporting it, whether it’s through revitalizing old buildings like the Toy Center, improving sanitation and safety or making sure the right balance of asset classes is maintained. Nicole says, as an example, traditional retail needs to make a resurgence to stem the oversaturation of restaurants.
Robert says his only regret about Midtown South is that he didn’t invest sooner.
“No one could have imagined Meatpacking to pull in triple-digit office rents," he said. "I wish we had jumped on it.”
But what about the most important question: what is Midtown South? No one’s really sure—still—and plenty of different definitions were offered. But, at this point, Miki says, the Midtown South brand is enough to sell a building, so why try and limit it?
