Wednesday, July 17, 2013

Mega Development Heating Up on Far West Side

Only a few times in modern Manhattan history has an entirely new office district sprung up all at once. In the 1930s, there was Rockefeller Center; the 1970s saw the World Trade Center complex; and today, developers are planning nearly 15 million square feet of new office space in the Hudson Yards area in the 30s on the Far West Side. TheElectricWeb looks at eight of the mega-towers which will be rising over the next twelve months.

The new projects include the Related Companies’ North and South towers at Hudson Yards, Extell Development’s One Hudson Yards, Brookfield Office Properties’ Manhattan West and Moinian’s 3 Hudson Boulevard, as well as Sherwood Equities’ 447 Tenth Avenue and Alloy Development’s 450 Hudson Park Boulevard.

But before starting construction on these new towers, developers must first land an anchor tenant willing to take at least 400,000 square feet of space.

But many companies are reluctant to move to newly constructed buildings, especially in an untested neighborhood. For most companies, it’s cheaper to stay in place and renovate, while others fear that moving out of prime Midtown, with its bevy of transportation options, will cause them to lose employees.

Despite these challenges, the developers appear to be beating the odds...

Hudson Yards - South Tower
Developer: Related Cos / Oxford Properties
1.7 million square feet  
Expected delivery: 2016

Hudson Yards -North Tower
Developer: Related Cos / Oxford Properties
2.4 million square feet
Expected delivery: 2018

In the most highly anticipated project on the Far West Side, Related and Oxford Properties have teamed up on a $15 billion, 26-acre Hudson Yards mixed-used project. Last month, Related made major headway on the project when it inked a 99-year, $1 billion lease for the eastern portion of the Metropolitan Transit Authority’s rail yards, which stretch from 30th to 33rd streets and from 10th to 11th avenues.

Construction started in December on the South Tower, which is located at 501 West 30th Street and is the first building planned for the parcel. It took more than three years to lure Coach, which ultimately purchased a 740,000-square-foot commercial condo from Related. (As part of the deal, Related agreed to acquire Coach’s building a block north at 516 West 34th Street.) Now, the South Tower is more than 80 percent leased (including expansion options), with L’Oreal in contract to occupy 402,000 square feet and SAP having signed a lease for 115,000 square feet.

Related will have to do it all over again with its second, larger building, the North Tower. Adding to the challenge is that the North Tower, designed by Kohn Pedersen Fox Associates, will rise on an 8.6-acre platform covering active Long Island Rail Road tracks. Construction on the $750 million platform will also provide a foundation for several other buildings.

But Related has said construction on the platform will start in January. That would allow for delivery of the building in 2018, as long as an anchor tenant is in place, he said.

As a selling point, Related is highlighting the large footprint of the North Tower, which financial firms could use for trading floors. Plus, the skyscraper will be adjacent to a planned 500,000-square-foot retail building, which Related hopes will allay tenants’ concerns about being isolated on the Far West Side with few food and shopping options.

To sweeten the pot, Related is also offering to swap properties or sell portions of the building as commercial condos, as it did with Coach. Related has also offered that the first companies that sign on for space will get in “at cost.”

Related pegged the asking rent for the North Tower at $90 per square foot and the price for a condo sale at between $900 and $1,100 per foot, for a hypothetical 1 million square feet.

Manhattan West - North Tower
Developer: Brookfield Office Properties
2.2 million square feet 
Expected delivery: 2016

Manhattan West - South Tower 
Developer: Brookfield Office Properties
3.2 million sq ft, 
Expected delivery: 2017

Brookfield first announced the Manhattan West project more than five years ago during the real estate boom. Designed by Skidmore, Owings & Merrill, the project would also sit atop railroad tracks, requiring a platform to cover them.

Like many projects dreamed up back then, Manhattan West was halted during the downturn. Then in 2011, the plans were dusted off and reintroduced, with a cheaper platform that would be built more quickly. But after being on the market for nearly two years — longer than any other project except Related’s — Manhattan West still has not landed an anchor tenant. Furthermore, the towers have evolved from a commercial-only concept to one that could include residential as well.

Despite not having a tenant, Brookfield plans to begin construction of the $300 million platform in August, with completion set for October 2014.

Brookfield has largely finalized the design of the North Tower, but could build it or the larger South Tower first, or even both simultaneously, depending on the anchor tenants’ needs.

Real estate executives not involved with Brookfield’s project said Time Warner is looking closely at the two towers, as well as at Related’s project.

We have the best location,” says Jeremiah Larkin, senior vice president and director of leasing at Brookfield, noting the project is just a block from Penn Station.

3 Hudson Boulevard
Developer: The Moinian Group
1.8 million square feet
Expected completion: 2016

Some consider the Moinian Group’s 3 Hudson Boulevard to be the best-positioned of the Far West Side’s new buildings: It sits on top of the No. 7 subway station and across from the Jacob K. Javits Convention Center.

Another advantage to the FX/FOWLE Architects–designed project is that “you are not on a platform, you are on bedrock.” said the developer, pointing out to potential tenants that “no water got anywhere near this site during Hurricane Sandy. Yet, you are on the Hudson River with water views.”

Like Related did with Coach, Moinian will look for prospective tenants that would want to sell their existing building in exchange for a condo unit at 3 Hudson Boulevard.

Asking rents in the 1.8 million-square-foot building are currently $85 per square foot, according to Moinian, but ultimately, “We hope to achieve in excess of $100 per foot in the tower.”

1 Hudson Yards
Developer: Extell Development
1.75 million square feet
Expected completion date: 2017

Extell Development owns a parcel at 34th Street, just south of Moinian’s. Gary Barnett is planning to construct 1 Hudson Yards, a 1.75 million-square-foot office building, on the site. But construction will not start until a tenant has committed to take at least 400,000 square feet of space.

But the MTA is readying the foundation for the Extell site as it builds the new No. 7 subway station, which gives the project “a running start” in terms of “speed to market and certainty of delivery.”

Extell has a reputation as a prolific residential and commercial builder, and is currently completing the 748,000-square-foot Gem Tower office building at 50 West 47th Street in the Diamond District.

But this parcel, like Moinian’s, is located on 11th Avenue, which could make it more difficult to lure tenants. However, the site is located in the heart of the Hudson Yards district

And unlike the multi-towered Related and Brookfield sites, which some tenants worry could be under construction for years, the Extell project is just one building.

450 Hudson Park Boulevard
Developer: Alloy Development / Boston Properties
1.1 million square feet
Expected completion: 2017

Alloy Development is far less well-known than its competitors, and its site is the smallest of those now vying for tenants.

Alloy assembled the site — west of 10th Avenue between 35th and 36th streets — in 2007. The location has been cleared and stands ready for a tenant, but there’s no set development plan in place, according to Alloy president Jared Della Valle, an architect and developer.

Brooklyn-based Bernheimer Architecture drafted a rendering, but the design was created to give tenants an idea of what the site could look like, and is not an active plan..

“Our opportunity is more build-to-suit,” said Della Valle, noting that the building can support floor plates as large as 48,000 square feet at its base.

Della Valle is working on plans for the project with large office owner Boston Properties. The two are each looking for a large tenant for the site, which Alloy could develop in partnership with Boston Properties.

447 Tenth Avenue
Developer: Sherwood Equities
2.5 million square feet
Expected completion: 2017

Midtown-based Sherwood Equities owns three parcels in the Hudson Yards area. But much like Alloy, it is less well-known than most of the other Far West Side developers. Sherwood is planning an office tower at 447 10th Avenue at 34th Street on a site it’s owned since 1986. Its other two, smaller sites in the district, will likely become residential or mixed-use towers.

But the firm is in a hurry to start construction on the massive office project, stating they expect rents in the area to rise dramatically once tenants start moving in to other new buildings.

Sherwood is nonetheless on the lookout for tenants in need of large chunks of space. Sources said the firm responded to an inquiry from Time Warner about potentially taking space at 447 Tenth Avenue.