A little more here on Park Avenue’s place in the rebirth of the city’s office market…
Some good stuff in this interview…
https://commercialobserver.com/2024/...filling-space/
Colliers’ Michael Cohen On Filling All That Empty New York Office Space
It all starts with rezoning vast swaths of the city and letting private capital come in
BY DAVID M. LEVITT
APRIL 16, 2024
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Cohen, president of the global brokerage’s New York tri-state region, is almost never at a loss for words about that region and where it’s going.
Cohen, with some assistance from Colliers’ statistical guru Franklin Wallach, recently sat down with Commercial Observer to answer questions that have been on the minds of not only the real estate industry’s professionals but policymakers and other business leaders.
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Commercial Observer: How do you see Manhattan leasing its way back to 10 percent availability (it was 18 percent at the end of the first quarter, per Colliers data), and how long will that take?
Michael Cohen: So, I imagine you knew this when you asked the question: I don’t really see us leasing our way back to 10 percent, or anything near 10 percent. Improved leasing can reasonably be part of the equation, but it’s not the single factor.
So if 10 percent is not the new normal, what is the new normal?
Job growth alone, which has historically been the way we lease ourselves out of the troughs of the market cycle, is not going to be sufficient. We’re going to have to look for other ways to reduce the oversupply to a more manageable number, closer to that 10 percent equilibrium
In some places in this market, we’re already there, remarkably. The difference between Park and Sixth and Third and some of the other submarkets as of year end 2023 — Sixth Avenue and Park Avenue in the primary areas have an availability rate of between 11.5 and 12 percent, which is much closer to market equilibrium, whereas Third Avenue, Seventh Avenue and Broadway had availabilities in the 19- and 20-plus percentages.
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So what you are saying is that we are seeing the areas along Park and Sixth race ahead while the rest of the city lags. Are you saying we’re going to have “have avenues” and “have-not avenues”? A bifurcation of the market? It would be nice if you had one part of town where everything is rosy and another where you could work on all sorts of conversion options.
I just want to clarify a couple of things regarding Park and Sixth. It’s not just their locations, which have always been appealing, as you have pointed out. There’s always been a tremendous amount of capital that has gone into them to make them more appealing to a 21st century audience. Also, the southern end around Bryant Park has also been a crossover market that is almost unique to Midtown, and that has appealed to the technology industry, anchored by the Salesforce Tower overlooking Bryant Park, which kind of gave the equivalent of the Salesforce seal of approval to that part of town.
And we’ve seen Indeed, Global Relay and a number of other technology clients focus on the Bryant Park neighborhood as distinguished from Sixth Avenue in general, and that has given Sixth Avenue a competitive advantage over other parts of Midtown.
The list of technology companies on Sixth also includes Take-Two Interactive at 1133 Avenue of the Americas, and then the other one is Array, and the one at 5 Bryant Park is Seamless-Grubhub. You don’t find technology companies in the Plaza District or on Park Avenue — that’s mostly financial services. But Sixth attracts finance and technology.
So the question still remains, how do we get from almost 100 million empty square feet or an availability rate of 18 percent, back to something closer to 10 percent, as we have on Park and Sixth? And the answer is a little of this and a little of that. It’s not monolithic.
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To come back to the question, legislation that is going to automate this process is going to be a big boost. That includes rezoning Midtown South. The city speaks to the elimination of these anachronistic manufacturing zones in that area that are really brimming these days with hospitality and retail and residential and office, and are not hospitable to manufacturing.
I’m going to switch hats here for a moment and be a bit of a booster because, as you may know, I chair the business improvement district known as Flatiron-NoMad, and we consider our neighborhood the poster child for the city of the future. The epicenter of Flatiron-NoMad is Madison Square Park. If you look in all directions around the park, you find the live-work-play environment that is so desirable.
And, to the north and the west of us, there are parts of town that cannot be put to their highest and best use under the current zoning. And the city is well underway soliciting public comment and planning to complete the public review and approval process by 2026. That’s going to open up millions of square feet for redevelopment into residential, both conversions and new construction. And I think there is tremendous demand for that. It’s long overdue.
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I have a theory that I haven’t heard anybody else share, which I will share with you. The city has, for a long time, had very little new development. In the real estate business, a modern building was one that was built in the 1980s or 1990s. There was very little in the wake of the 2001 meltdown, very little construction in the 21st century. And part of the problem was that in the most desirable neighborhoods along Park and Madison and so forth, if you tore down a building, you couldn’t even rebuild what you tore down. So intrepid developers like L&L Holding came up with workarounds.
So we had this inability to create new product due to this anachronistic zoning. L&L used these workarounds, but they were not as satisfying as tearing down an old building and replacing it with a new one. So Hudson Yards was born, I believe, off the overflow of tenants who could not find the large modern new buildings that they needed in Midtown.
Simultaneous with Hudson Yards, the city did an experiment with rezoning to allow buildings as large as One Vanderbilt, which proved hugely popular.
And, in the wake of One Vanderbilt, the city changed the zoning, so the air rights to St. Patrick’s and Grand Central are fungible over a large swath of Midtown East.
The poster child for this, I always say, is 250 Park, which is in a fabulous location and is being offered for sale right now. It’s a building that has a demolition clause in it. I guarantee you, every buyer looking at that building is looking at it as a development site. It will eventually be torn down and replaced by a supertall.
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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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