[NYguy]

https://www.barrons.com/podcasts/at-...cfa6e7?page=1&

Park Avenue Is Back. A Real Estate Executive Explains Why.
Michael Rudin, the co-executive chairman of Rudin, spoke about what's spurred the revival—including the urge for workers to walk to the office.


2/27/2025
Andy Serwer

Andy Serwer: And these buildings, as I said, are monsters. I mean, 345 Park Avenue has its own zip code. Blackstone's headquartered there, the NFL is there. I think you guys are there as well.

William Rudin: That's our headquarters. Our headquarters were originally at 415 Madison, which I'll come back to in a second. But yes, 345 is our largest building, nearly 2 million feet. And the summer of 2024, we renewed Blackstone. It was the second-largest deal of the year. They expanded, and they're over a million square feet. And the back story is, in 1985, when Steve Schwarzman and Pete Peterson formed Blackstone after they had been let go of Lehman Brothers, they formed Blackstone, really one of the first fully integrated asset management companies, but they weren't getting any business, they weren't getting any traction yet, and they couldn't find office space.

They ran into my father on 52nd and my uncle on 52nd and Park Avenue, they were all four of them were going to the Four Seasons restaurant. And my dad said, "Hey, Steve and Pete. How are you guys doing?" And they told them their story of woes and they couldn't find space. And my dad tapped Steve on the shoulder and said, "Look up to the 30th and 31st floor of 345 Park Avenue. We've got two floors. Union Pacific had just moved out. They're fully built. You guys come and look at the space. And we're not worried about your credit. We think whatever you're going to do is going to be successful. We believe in you." And so that was a 60,000-foot deal. And they shook hands, they made the deal, and today they're a million plus square foot tenant. So that's the kind of relationship that we have with our customers and our tenants.

Andy Serwer: I didn't know the tech companies were actually building out. I thought they were contracting. But that's a fascinating point. Maybe here and not there in California. Park Avenue though, Bill, is back, right? I mean, and I'm curious as to why that is the case. And I know you have the Citadel Building that you guys are working on as well, which is on Park Avenue, as part of that. But it's kind of the Mad Men era zone of New York is coming back.

William Rudin: Well, it is coming back. What happened in the 2000s was there was no new construction on Park Avenue, and people were moving to Hudson Yards and other parts of the city. Then owners realized that people were moving out, and what did we need to do? We needed to compete. We needed to invest, reinvest in our buildings to attract and retain and get people back into their offices, because it's really the talent that's driving companies being in New York City, our diversity of people and its connectivity.

And so we realized we needed to be competitive with these newer buildings, so we put in amenities, food, wellness, outdoor space. And literally every building along Park Avenue was doing that. But the real fuel to the fire was when Jamie Dimon in 2018 announced that they were going to tear down their headquarters at 270 and build their new-world health quarters, which is going to open this summer. And I walk by the building every day. I look out my office every day from 345. And it was a game-changer in terms of people's mindset, in terms of the East Side and its connectivity to Grand Central. You also have Long Island Railroad now coming into Grand Central Madison. I call it East Side Access. That was the original name of it. And that's bringing thousands of commuters into Park Avenue and Grand Central area, so they don't have to go to Penn Station. And that was really also a significant game-changer.

And so, once that started happening, there was new zoning that the city did in 2017, and that's what's driving the demand. And on top of that, it's post-COVID. People don't want to take two subways, take a train, commuter train, and then get on the subway. They want to be able to walk to their office. So that's really driving the demand. And Park Avenue is, I think, around 8% availability. The lowest probably in any central business district in the country.

And so we're with Vornado, VNO, Steve Roth and Citadel are in the zoning process, the entitlement process to build a new headquarters, New York headquarters for Ken Griffin. He's also a partner in the project at 350 Park. We own a building behind there. So we collaborate and put our developments, our sites together. And this'll be a 1,800,000 world-class office building. That's very, very exciting. And I'll be able to watch that construction from my office.

And so that's the type of thing that's happening in New York City. And then they realize, Citadel realizes that to get the talent, they have to have this type of infrastructure, and the young people want to be in New York City.