In lieu of our biweekly market meetings, Mary Ann Tighe asked our market group if we’d be interested in attending a panel titled “Midtown Means Business” where she was one of the panelists. The discussion took place at 1271 Avenue of the Americas, a perfect venue for an event focused on future plans for Midtown properties and challenges/opportunities Midtown owners anticipate in the near-term (1271 Avenue of the Americas, the former Time-Life Building, currently has 2.1M sq. ft. to lease and is undergoing a $600M redevelopment.) The event garnered significant interest across the industry and included top leasing executives from Boston Properties, L&L, Vornado and Oxford – four prominent Midtown office owners.
If there were two “buzzwords” to take away from this discussion, they are product and community. Panelists discussed the feeling that product has become more important than location in today’s market – with Mary Ann even saying that “product, product, product” has replaced the industry old indium of “location, location, location.” Scott Rechler, CEO of RXR Realty (and owners of eight Midtown properties,) agreed. He pointed to RXR’s successful leasing initiatives at the Starett Lehigh Building (where five years ago, he said, no one knew where it was) and Pier 57, a building with “no location,” yet a place where Google will be occupying 250,000 sq. ft. One could counter that these two buildings are not in Midtown; however, Mary Ann would respond that the same success is true for her team’s leasing initiatives at 787 11th Avenue, a building recently purchased by Bill Ackman and Georgetown (located on 54th Street and 11th Avenue!) that has generated significant interest from various users.
The panelists, which also included Winston Fisher of Fisher Brothers, all agreed that in order to stay competitive, owners need to invest significant capital into their buildings and think long term. If done successfully, however, they were confident their buildings would lease because as Scott put it, “tenants are willing to pay for nice space.” Scott and Winston talked about doing more than just investing in theirbuildings; for Midtown to win, remain competitive and retain 21st century tenants with 21st century employees (millennials) in 20th century buildings, they had to also invest in the community.
To make his point, Scott talked about the success of Urban Space, a massive food hall located underneath 230 Park Avenue. As an employee of CBRE in 200 Park Avenue, I can attest first hand to the success of Urban Space. It’s constantly packed, vibrant, and filled with people meeting for lunch, coffee or even a glass of wine after work. The panelists noted that successful buildings respect the character of the community; to be attractive to tenants, you must let the community define its character and then cater to that character through your amenities. Urban Space does exactly that and provides a great amenity for tenants in 230 Park Avenue and the Grand Central submarket more broadly.
For owners with a consistent commitment to quality, the long-term prospects for Midtown remain sound. Personally, I am involved in the repositioning of Boston Properties’ 399 Park Avenue. Here, we are working with Gensler to renovate the building entrances (from both Park Avenue & Lexington Avenue,) recladding the exterior of the building to give it a new sleek feel, implementing green roofs on various building setbacks and replacing an existing auditorium on the 13th floor setback with a new signature design that will provide a prospective tenant the opportunity for a “glass oasis” overlooking Park Avenue. While the renovations are still being designed, we have had numerous tours and proposals from prominent tenants that recognize the value these building enhancements will bring to their employees and I have no doubt that 399 Park will lease at competitive pricing.
As a landlord advisor, it’s fun to work for owners willing to spend the capital to improve their buildings and as a tenant adviser, it’s equally rewarding to help them see and believe in the transformation. If interested in learning more about today’s panel or having a discussion about the Midtown office market in general, please e-mail me at [email protected].