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.
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.
1 Hudson Yards
Developer: Extell Development
Size: 1.75 million square feet
Expected completion date: TBD
Extell Development, headed by Gary Barnett, owns a parcel at 34th Street, just south of Moinian’s. Barnett is planning to construct 1 Hudson Yards, a 1.75 million-square-foot office building, on the site. But construction will not start until a tenant or tenants have committed to take at least 400,000 square feet of space, said Jones Lang LaSalle Managing Director Derek Trulson, who is part of a team handling leasing at 1 Hudson Yards.
But he said the MTA is readying the foundation for the Extell site as it builds the new No. 7 subway station, which gives the project “a running start” in terms of “speed to market and certainty of delivery.”
Extell has a reputation as a prolific residential and commercial builder, and is currently completing the 748,000-square-foot Gem Tower office building at 50 West 47th Street in the Diamond District.
But this parcel, like Moinian’s, is located on 11th Avenue, which could make it more difficult to lure tenants, brokers said. Trulson, however, said the site is “central to all of the Hudson Yards district.” And unlike the multitowered Related and Brookfield sites, which some tenants worry could be under construction for years, “we are one building,” Trulson said.
He declined to specify the asking rent, but said Extell would fight for tenants. “We are going to be competitive,” he said. “The nature of the site and our basis allows us to be. We believe we will be as competitive as anyone in the market.”
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