http://blogs.wsj.com/metropolis/2011...e-development/
February 10, 2011, 1:12 PM ET.Related’s Ross Is Upbeat on West Side.Search Metropolis .Article Comments Metropolis HOME PAGE ».EmailPrintPermalinkTwitter
By Eliot Brown
Jason Andrew for The Wall Street Journal
The West Side rail yards, above, is the site of planned tower by Related Cos.Pessimistic? Not Stephen Ross.
In the midst of a slow recovery of Manhattan office rents, Ross — the billionaire chairman of the Related Cos. and one of the city’s most active developers — predicted Wednesday night that he would lure major new office tenants to the yet-to-be-developed West Side rail yards later this year.
“I think we’ll sign about three-and-a-half million square feet of space this year,” Ross said, speaking at a forum hosted by Columbia University’s Graduate School of Architecture, Planning and Preservation.
Development rights above the rail yards, a 26-acre Long Island Rail Road storage site by the base of the Javits Center, are controlled by Related. At the market’s crest, the property was seen as the next frontier for Manhattan office space. But since the financial crisis banks and other major companies all scaled back future expansion plans, making development in an unproven area with extensive infrastructure costs far from inevitable in the near term.
Asked later about his optimistic predictions, Ross said his firm is “negotiating with several tenants” and argued that momentum would pick up after a few signed on. “It’s always the first mover that’s the most difficult,” he said. “But I think I’m very encouraged by the interest.”
Related, which developed the Time Warner Center, has been pressing ahead with preparations for the site. The wall around the yards has already been shrouded with a giant banners advertising the future development, and the company is already actively marketing the site to tenants.
Related’s pitch is that the site offers a cheap price –- the first tenants are being offered their space at the cost of building, while Related would hope to make money from the luxury apartments on the upper floors –- and the ability to create a new, park-lined community on the less-congested far West Side. Now far from trains, the area is slated to have a new station for the No. 7 line by the end of 2013.
Of course, 3.5 million square feet (nearly one-and-a-half Empire State Buildings) is by no means a trivial figure when it comes to leasing. Many observers in the real-estate industry feel it’s an uphill fight for Related to even win a tenant of 1 million square feet this year, given the relatively sluggish economy.
New buildings tend to be particularly expensive and only appeal to certain tenants. Within the past year, the other major new office buildings in town– the three buildings planned or under construction at the World Trade Center — have only received a tentative commitment from one: Conde Nast, for about 1 million square feet. Those buildings can afford to offer significantly lower rents to tenants than those on the West Side due to hundreds of millions of dollars in government assistance, although the rail yards buildings also benefit from some tax breaks.
Speaking after the talk, Ross, who owns the Miami Dolphins, acknowledged his leasing target might not come easy. “I’m the same guy who predicted the super bowl for Miami,” he said.