Downtown Landmark Makes a High-End Play
The Woolworth Building, known for its height when it opened in 1913, is being extensively renovated.
By ALISON GREGOR
May 30, 2007
In a leap of faith in the Lower Manhattan office market, a group of real estate developers is creating what would be the financial district’s first office tower with a country club’s exclusivity — and perhaps its extraordinary membership fees — in the Woolworth Building.
The group, 233 Broadway Owners, led by the developers Steven C. Witkoff and Ruben Schron, plans to create an “office club” on the top 25 floors of the Woolworth Building
, one of New York’s signature skyscrapers. The intent is to attract affluent tenants like hedge funds and private equity firms.
The Woolworth Building, a striking Gothic structure at 233 Broadway, between Park Place and Barclay Street, was once called the Cathedral of Commerce.
After the renovation, the tower will have its own private entrance and lobby off Park Place adjacent to the lobby designed by the building’s architect, Cass Gilbert. The new lobby will attempt to match the opulence of the original one with Italian glass ceiling tiles and fine millwork, but it will also have large high-speed elevators.
The top 25 floors of the building, which were once lower-rent floors occupied by tenants like dentists and barbers, have been gutted. Ranging from about 3,500 to 8,000 square feet and once slated for conversion to luxury condominiums, the larger floors are now being converted into plush offices, while the smaller floors will contain private meeting rooms and a dining room for upper-floor tenants.
Tenants will have use of a private observatory deck on the 58th floor of the 60-story building, and the round elevator encased in glass serving the highest floors is being rebuilt. In the base of the building, the developers hope to restore the original swimming pool used by Frank W. Woolworth. They would also like to add a fitness center.
Motivating the developers is the fact that about a dozen select office towers in Midtown Manhattan, including 712 Fifth Avenue and the Seagram Building, have achieved rents of almost $150 a square foot, or 75 percent more than the average asking rent of $85.28 for premium space in Midtown, according to Jones Lang LaSalle, the commercial real estate services firm.
“Midtown was able to take its signature buildings and make them very important destination buildings for certain tenants,” said Randolph H. Gerner, a principal at Gerner Kronick & Valcarcel, the architecture firm designing the Woolworth renovation. “The Woolworth Building is already a destination building, so it seemed like a logical jump to create a similar product.”
The qualities that make the Midtown buildings attractive to small wealthy firms are relatively small floors of less than 14,000 square feet — called boutique space, which can provide full-floor identity — as well as fabulous views, often of Central Park, brokers said.
The Midtown towers typically have well-appointed lobbies, top-notch security and technology, and convenient parking for limousines. Part of the buildings’ appeal is their proximity to one another, as well as to fashionable shops, luxury hotels and Fifth Avenue residences.
Those qualities — and especially the rents — may be difficult to replicate in Lower Manhattan, brokers said, even in the Woolworth Building, which was built in 1913 and was then the tallest building in the world, at 792 feet.
The developers said they expect the rebuilt floors to be occupied by the end of 2008. While they said they were uncertain about the cost of the renovation or the prospective rents, there is no doubt that the rents will be higher than average for premium space downtown, which is about $50 a square foot, said Barry Pincus, the president of Phoenix Asset Management, which is in charge of operating and developing the building on behalf of the ownership.
The top floors of the building, with 360-degree views that include the Empire State Building, the Statue of Liberty and more distant landmarks, may achieve initial rents of $60 to $75 a square foot, said Peter Riguardi, president of the New York region of Jones Lang LaSalle.
The belief that rents can go much higher downtown reflects not only an overflow in commercial demand from Midtown to downtown, but also to the rapid residential growth of Lower Manhattan, he said.
“We’ve done a couple of hedge fund deals now in the TriBeCa area in converted lofts,” Mr. Riguardi said. “Some of these well-to-do hedge fund managers are now living in TriBeCa and SoHo, and interestingly enough, there’s a walk-to-work mentality that could occur in some parts of Lower Manhattan similar to what’s occurred on the Upper East Side on Park Avenue.”
Downtown Manhattan is also starting to attract some of the kinds of stores that might serve affluent residents, real estate experts said.
“I think there are unbelievable things that are going on in Lower Manhattan,” said Jonathan L. Mechanic, chairman of the real estate department of the law firm of Fried, Frank, Harris, Shriver & Jacobson, which has offices downtown. He noted that Tiffany & Company and the luxury retailer Hermès are now in the area, while a Whole Foods is opening, and there’s a BMW dealership on Wall Street. “The deli is gone, and the BMW is in,” he said.
Currently, the most expensive office space downtown is in the newly built 7 World Trade Center, which is achieving rents as high as $80 a square foot, brokers said.
Though 7 World Trade Center, like almost all the newer office buildings downtown, has large floors of about 40,000 square feet, some of its space is being divided into smaller units that are commanding a premium of 10 to 20 percent over typical leases, said Bruce Surry, an executive vice president at the commercial brokerage CB Richard Ellis.
Still, the Woolworth Building would be the only building of its era in Manhattan that aims to provide very high-end offices, Mr. Surry said.
“The one thing that is consistent in Midtown is that all of those buildings are new modern buildings,” he said. “All were built in the 1970s or later.”
Some brokers said that they have their doubts about the potential of redeveloped buildings to succeed as magnets for tenants willing to pay stratospheric rents. Rather, they think the odds for that kind of success are better for new buildings with certifications for being environmentally friendly.
“I think the fact that it’s new construction and ‘green’ will be important going forward,” said Jack Petrie, a senior vice president at the brokerage Cresa Partners. “That kind of space will drive the upper end of downtown rents.”
Richard Woodward, left, an associate at Gerner Kronick & Valcarcel, and Randolph H. Gerner, a principal, at the Woolworth Building.