https://www.nytimes.com/2024/04/22/n...ice-space.html
How Hudson Yards Went From Ghost Town to Office Success Story
The vacancy rate at Hudson Yards’ office towers is considerably lower than in the rest of Manhattan, though its luxury housing and retail offerings have been less successful.
By Matthew Haag
April 22, 2024
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It was March 2019, and 13,000 people were on Manhattan’s West Side at a star-studded opening ceremony for the largest private real estate project in United States history: Hudson Yards.
A year later, the development was a ghost town.
Shops were closed and offices emptied; the coronavirus pandemic had walloped the corridor of luxury skyscrapers, high-rises and retail near the Hudson River that rose atop a mix of rail yards and parking lots. The roughly $30 billion planned neighborhood looked like it had fizzled before it ever got started.
But now, five years after that grand opening, Hudson Yards has not only survived, but it has also emerged as perhaps the most dominant office market in New York City, a bright spot as companies across the country cut space in the shift to remote and hybrid work. The neighborhood’s glass-and-steel towers have attracted some of the most valuable companies in the world — including BlackRock, Pfizer and Ernst & Young — to pay some of the highest rents in the country.
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The remarkable turnaround has even won over some of the project’s loudest critics, who had bemoaned the neighborhood as a soulless, inauthentic enclave for the wealthy whose developers received generous property-tax breaks. Skeptics had also predicted that area — bounded by Eighth and 12th Avenues from West 30th to West 42nd Street — was too out of the way for New Yorkers.
Brad Lander, the New York City comptroller, was among those critics. But now? “I got it wrong,” he said.
The success of the office market at Hudson Yards stands in contrast, though, to the other main components of the project, luxury housing and a multistory mall, which have not fared as well. It has also laid bare the widening chasm between the fortunes of the city’s few very-high-end office towers, including those around Grand Central Terminal, and the woes of everyone else.
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In Hudson Yards, vacancy is under 10 percent, and several buildings are fully occupied. At one building, 50 Hudson Yards, the only available space is on the top floors, with an asking price of more than $200 per square foot per year, almost triple the city average.
The Hudson Yards buildings are largely filled with companies that have mandated a return to the office, and Related Companies, the main developer of Hudson Yards, said that foot traffic at the mall in 2023 had nearly returned to 2019 levels. Employee attendance often exceeds 80 percent on Monday through Thursdays, according to the businesses and developers: similar to rates before Covid and nearly double the rate of other office buildings in the New York City region that are tracked by Kastle Systems.
When the area opened, Mr. Lander worried that the property-tax breaks on new buildings — up to a 40 percent reduction for 20 years — were an unnecessary giveaway to developers. But, he said recently, the development was on track this year to contribute about $300 million more in tax payments than projected to the city’s coffers.
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Several major companies that have moved to Hudson Yards said that its modern, gigantic office buildings offered advantages over most Manhattan buildings. Until recently, BlackRock, the asset management giant, had 4,000 employees spread over 31 floors in three buildings in Midtown East. Now they are on 15 continuous floors in Hudson Yards.
Ruth Colp-Haber, chief executive of Wharton Property Advisors, a real estate brokerage, said Hudson Yards illustrated the growing divide between the top office towers, known as trophy buildings, and the rest. In Hudson Yards, asking rents can start in the low $100s per square foot per year and skyrocket; the Manhattan average is around $70.
“The majority of tenants cannot afford half this rent,” Ms. Colp-Haber said. “For the very rich companies, they have no problem with this rent, and they are thrilled to be able to move their companies there.”
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In the 2010s, when Related was in the early stages of building Hudson Yards, company executives believed that its offices would lure companies but that the real moneymakers would be retail, notably its mall and its luxury condominiums. But the script flipped.
Developers have built several luxury apartment buildings, all of which are full or near it. While they include some below-market-rate units, most one-bedroom rentals start around $6,000 a month, far above the city average.
But the luxury condominiums have not performed as well, selling at about half the rate of other condo towers in Manhattan, according to Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers and Consultants.
Representatives for Related disputed that assessment and said the developer’s own data showed that the buildings were among the top-selling condo towers in the city.
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The weaker-than-expected condo sales have led Related to reduce the number of luxury units it plans to build in the neighborhood’s last undeveloped tract. The firm wants to create nearly 1,950 fewer residences there than initially planned, though it still plans to build 324 affordable rentals, as it promised city leaders in an agreement from 2009.
“In this day and age, there is a desperate need for more housing,” said Jeffrey LeFrancois, the former chairman of the local community board.
The Shops & Restaurants at Hudson Yards mall opened with a slate of very high-end retailers, anchored by a three-story Neiman Marcus, which signed a 50-year lease as malls nationwide were struggling. But the department store filed for bankruptcy and moved out of the mall in 2020. That space is now being converted into offices for Wells Fargo.
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The pivots in the housing plans and at the mall are part of Related’s ongoing changes at the development. Recently, the firm rolled out its vision for the last undeveloped area in the neighborhood: a casino and resort. And later this year, the company plans to reopen the Vessel, the 150-foot tall spiraling staircase that was closed off to visitors in 2021 after four people had jumped to their deaths. Floor-to-ceiling steel mesh is being installed as a safety barrier.
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NEW YORK is Back!
“Office buildings are our factories – whether for tech, creative or traditional industries we must continue to grow our modern factories to create new jobs,” said United States Senator Chuck Schumer.
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