New York's Aging Buildings

[NYguy]

http://www.observer.com/2010/commerc...dings?page=all

New York’s Aging Buildings


The Flatiron Building, born in 1902

By Roland Li
February 1, 2010

Out With the Old ...

This older commercial stock may spur new development, as tenants demand new technology and greener features.

"It's going to push forward all the big development projects that are stalled at the moment," said Vishaan Chakrabarti, director of the real estate development program at Columbia University's architecture and planning school, and the onetime executive, on behalf of Vornado Realty and the Related Companies, in charge of the oft-planned Moynihan Station transit hub over the current Penn Station. He cites Hudson Yards and the World Trade Center site as major development areas over the next decade.

"I don't think the aging stock, in and of itself, is a problem," Mr. Chakrabarti said. "The current obsolete stock is just an awful lot that's very similar to each other."

Older office buildings generally have larger, pre-Web floor plates, which are usually unsuitable for modern, smaller companies, or simply not economically advantageous. Older buildings may also lack the heating, plumbing and new technologies that make newer buildings more energy efficient. "I think it's a no-brainer that you've got to do it LEED-certified," said Stephen Siegel, CB Richard Ellis' global brokerage chairman and a legendary commercial dealmaker. "It can be a windfall."

Malkin Holdings started a revamp of the Empire State Building right around the iconic tower's 75th birthday, in 2006, in an effort to make it greener and more attractive to tech-savvy companies. "In the building itself, even back in 1980, you had the long hallways, which seemed to have hundreds of doors on them, and it seemed as though it was a terrazzo floor and fluorescent overhead lights and most had frosted glass windows and gold lettering on them," Anthony Malkin, president of Malkin Holdings, told The Commercial Observer in January. "And it looked like a combination of a hotel and an episode of The Twilight Zone."

Demand for new, green buildings also has much to do with business realities. "As the job market comes around and employment returns, there is going to be a very significant need for new, state-of-the-art buildings," said Robert Knakal, chairman of investment-sales firm Massey Knakal, referring to the inevitable end of the Great Recession.

"The impetus to build new buildings is based on economic incentive," Mr. Knakal added. "I think the challenge for city planning is finding a balance between preserving the historic nature of the city while allowing for well-conceived and much-needed new development."

Conversion Opportunities

This new development might come through teaching old dogs new tricks.

Take 141 East 44th Street. It was built as a prewar residential building. It was later converted to office space, and the property was renamed Fitzpatrick Grand Central in 1997, and now serves as a 155-room hotel.

Or 636 11th Avenue. In January 2008, advertising company Ogilvy & Mather leased the entire 11-story building. The owner originally wanted to convert the property, a former chocolate factory, to a residential space, but then decided to make it office space, according to Joseph Brancato, a managing principal at architecture and design firm Gensler. "They wanted something cool," said Mr. Brancato, who was involved in the renovations. "There are things you can do with these older buildings that you can't do with a Class A office space."

The building's location, near the Hudson River and the Eighth Avenue subway lines, was also a boon. The West Side may be an area of great development in the next decade, not merely through Hudson Yards, but also through art galleries in Chelsea and along the High Line. The Chelsea Fine Arts Tower at 545 West 25th Street, a commercial condo completed in 2007, was leased quickly.

If all else fails, a developer can demolish an older building completely and start from scratch. As vacant lots continue to disappear, it may be the only way of creating new space. However, such demolition and redevelopment is costly, both financially and environmentally, especially compared to renovation.

Much of Manhattan also lies within a historic district, which means that any demolitions or significant alterations to a building's facade must first be approved by the city's Landmarks Preservation Commission, which is typically a lengthy and controversial process. Even if a company ultimately does gain approval, they often attract the ire of local preservation groups and neighbors.

"Sometimes you need to take a second or third look before you bring in the wrecking ball," Mr. Brancato said.