http://commercialobserver.com/2019/0...-hudson-yards/
Colliers’ Michael Cohen Talks About the Future of Midtown in the Age of Hudson Yards
BY REBECCA BAIRD-REMBA
APRIL 30, 2019
Quote:
Most of the buildings you manage are in Midtown or Midtown South. There’s this kind of tension between the areas where Midtown South is getting more expensive and Midtown rents are starting to either decline or not grow at the same rate. What do you think the future holds for Midtown as a market?
If you were looking at a chart of Midtown, Midtown South and Downtown over the past 10 years, what you’d see is they all three peaked in ‘07 and took a nosedive in ‘08, ‘09. Midtown hasn’t yet retained its peak, whereas Midtown South and Downtown have both recovered past their peak. And the gap between Midtown and Midtown South is shrinking. Midtown is now like $6 [less per square foot]. It’s catching up. And we will also track the migration. Whereas Downtown and Midtown South have had a net increase in tenancy since the trough, O.K., let’s say 2010 or whenever that was, Midtown has had a net decrease to the tune of about 10 million square feet of tenancy.
Why do you think that is?
Traditionally, Midtown, Sixth Avenue and Midtown East was the market with the highest demand in Manhattan, right? That’s the core. But for the most part, due to outdated and anachronistic zoning, there was no ability to renew the building stock right in that part of town.
So, there were a couple of workarounds, right? [Like] 390 Madison and 425 Park. But L&L will tell you that having to retain the superstructure of the existing buildings was a huge pain in the ass. Then the city did this kind of spot zoning with SL Green [in the area around One Vanderbilt], which led to the Midtown East rezoning.
But along the way [that led] to a battle [with developer] Andrew Penson and Argent over the disposition of the air rights over Grand Central [which Penson’s Argent owned]. He made an investment in that, and he had a monopoly on air right sales. And then along came the city, which said, “Give me a subway; give me this; give me that.” So, while this is all being sorted out, the demand grew from the traditional Midtown core tenants, the FIRE sector, for new product. Well, I mean, that’s just natural; not every business wants to be in a building that was built 35 years ago, right?
Or 70 years ago.
We lived in a town where, by 2005, a new building was one that was built in 1987. That was almost 30 years old, and that was new, right? The development industry, hamstrung over here in the Midtown core, pioneered Hudson Yards. And it ate Midtown’s lunch.
And now, once the damage was done, the city fathers got their act together and said, “Well, maybe we should, you know, rezone this thing here called Midtown.” And let people tear down buildings. I mean, how stupid—you tear down for 425 Park, and you have to build a smaller building? On what planet does that make sense?
I personally believe that when you live or work in Midtown Manhattan, you have given up your right to sunsets and vistas. You have bought into this alternative reality that looks more like Shanghai and Hong Kong; you’re going to be living in it and working in a canyon of towers.
So, for me, for the city to be in the business of trading infrastructure for bulk is a perfect business. It’s the perfect way to help the infrastructure, keep up with the private industries’ redevelopment. Seems like it took forever for them to figure that all out.
My prediction is, well, the cow has left the barn, right? Hudson Yards is up and running. And there’ll be a lot more development over there. But at long last, Midtown will develop new buildings that can compete with Hudson Yards. And I think the balance will eventually shift back. It’s going to take some time.
Hudson Yards had first mover advantage in the 21st century. And Midtown paid a heavy price for, I think, some very poor decision-making.
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I agree with all of this.
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