http://therealdeal.com/issues_articles/the-far-side/
Office developers compete for anchor tenants on Manhattan’s western edge
With only a finite number of large potential renters, the fight for office tenants on the West Side is heating up.
From left: Cushman & Wakefield’s Bruce Mosler and Brookfield’s Jeremiah Larkin at the Manhattan West construction site
May 01, 2013
By Adam Pincus
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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. The new projects expected to rise over the next decade 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 10th 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. With only a finite number of large potential renters, the competition for office tenants is heating up, as some of the city’s top commercial leasing brokers and developers battle each other with slick marketing campaigns and — of course — behind-the-scenes jabs at rival projects.
In 2011, fashion manufacturer Coach signed on to be an anchor tenant of Related’s South Tower. But Coach was already located a few blocks away, in a building directly in the path of Hudson Yards bulldozers. For many of the other big companies whose names are being kicked around as possible anchor tenants, a move to the Far West Side would represent a significant geographic shift from Midtown or Downtown.
There are currently 10 to 20 companies said to be on the hunt for large chunks of Manhattan office space, brokers said. These include media companies Time Warner, Sony, CBS and News Corp.; law firms White & Case and Skadden, Arps, Slate, Meagher & Flom; advertising firm GroupM; financial giant Credit Suisse; and fashion house Ralph Lauren.
Brokers for the new Hudson Yards–area towers are fighting to lure these tenants, but their efforts could be in vain if companies decide to stay in their current locations, or move to existing office towers instead. Despite these challenges, Hudson Yards so far appears to be beating the odds. Last month, Related snagged two more tenants for the South Tower: French cosmetics maker L’Oreal and software firm SAP.
Manhattan West
Developer: Brookfield Office Properties
Size: North Tower, 2.2 million square feet; South Tower, 3.2 million square feet
Expected delivery: 2016 or 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, according to Bruce Mosler, chairman of global brokerage at Cushman & Wakefield. Mosler’s team was hired to market and lease Manhattan West.
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, Mosler said.
“There are use groups we are talking to that would encompass one tower, and there are users we are talking to that would require us to build [both] towers” at the same time, Mosler said.
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.
Mosler and Jeremiah Larkin, senior vice president and director of leasing at Brookfield, ticked off the advantages of the site, including the South Tower’s 90,000-square-foot floor plates, the largest of the six competing projects. Insiders also noted that the platform will be just 2.6 acres (compared to roughly 8.6 acres on Related’s site), so it will be easier to construct.
“We have the best location,” Larkin said, noting the project is just a block from Penn Station.
But the tradeoff is that the project will receive tax breaks of only 25 percent, compared with the more generous 40 percent decrease for projects west of 10th Avenue.
Mosler and Larkin would not reveal the asking rent, saying only that the rents would be “competitive.”
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