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As seen in
April 30, 2003
Regional Market
Far West Side
The Final Frontier for Development in Manhattan
by JOHN HOLUSHA
A few years ago, while the dot-com and telecommunications businesses
were flourishing, some of the old industrial buildings on Manhattan's
far West Side attracted tenants that wanted well-wired, expansive
spaces regardless of the distance from subway lines.
In those heady times, annual rents in the area west of Eighth
Avenue rose to the mid-$40's a square foot, with a few deals
at more than $50, according to brokers who work in the area.
Recently Newmark & Company Real Estate, the broker for the building
at 450 West 33rd Street at 10th Avenue, advised potential tenants
that the asking rent -- usually the starting point for negotiations
-- had been reduced to $29 a square foot. And, if a company
rents enough space in the 1.63-million-square-foot, 16-story
building, it can have its own entrance and dedicated elevator,
the Newmark executives promise.
While some real estate executives regard the far West Side as
the final frontier for development in Manhattan, and city officials
envision the area adding 28 million square feet of commercial
space and 12 million square feet of residential construction
by midcentury, the current demand for office space has clearly
declined.
''The demand, driven by dot-com and
telecom companies, encouraged owners to renovate buildings to
attract people to peripheral locations,'' said James S. Meiskin,
the president of Plymouth Partners, a broker that represents
tenants. ''We are talking about buildings like 111 Eighth Avenue
and Starrett-Lehigh in addition to 450 West 33rd.''
Since then, he said, the disappearance or shrinking of many
of those technology companies has produced empty space on the
West Side. And today's pickier tenants are less willing to make
the hike from faraway subways.
''The Starrett-Lehigh Building is eight
blocks from the nearest subway stop,'' Mr. Meiskin said. ''That
means there are transportation and security issues.'' The building
is on 11th Avenue between 26th and 27th Streets.
Nevertheless, the West Side is becoming a center for communications
and nonprofit companies, David A. Falk, an executive vice president
of Newmark, said. Indeed, the building at 33rd Street and 10th
Avenue, which once housed the Sky Rink for ice skating on its
top floor, is the home of The Daily News, the public television
broadcaster WNET and DoubleClick, an Internet advertising company.
The Associated Press, whose lease in Rockefeller Center expires
next year, is also considering the space.
''We have also had Planned Parenthood take 104,000 square feet
next door at 424 West 33rd,'' Mr. Falk said.
He said the large 115,000-square-foot floors in 450 West 33rd
Street, which covers two blocks over railroad tracks between
31st and 33rd Streets, is attractive to companies that want
to operate on one level, despite the distance to transportation.
''You are not going to get a foreign bank that's on Park Avenue
now to move here, but you are going to see a lot of activity
from companies in the media and communications business over
the next few months,'' Mr. Falk said.
Falling rents on the West Side are no surprise because there
is a large amount of sublet space putting downward pressure
on rental rates across Manhattan, said Bruce Mosler, the president
for United States operations at Cushman & Wakefield, the brokerage
and services company.
''Sublease space accounts for 35 percent of the current inventory
and it is being offered at a 30 to 40 percent discount to direct
space, so there is downward pressure,'' he said. But once the
sublet space is absorbed, he said the office market would be
in rough balance and new development would be needed to accommodate
the job growth he anticipates beginning by 2005.
With the exception of the Consolidated Edison site on the East
Side just south of the United Nations, the best development
sites left in Manhattan are on the far West Side, he said. By
late in this decade, Mr. Mosler said, the city will be able
to absorb one million square feet of new office space a year
there.
''There will have to be an upfront investment in infrastructure
including mass transportation, but this is the last great area
for development,'' he said. ''If that does not happen, development
may seep out of the city as it has in the past to the New Jersey
waterfront.''
Mr. Meiskin, the tenant broker, noted
that in a weak market tenants were in a position to demand concessions
from landlords, including periods of free rent and contributions
to the cost of interior construction.
Adding in these concessions reduces the effective rent, he said.
Taking an asking rent of $29 a square foot as an example of
a starting point in the current market, he said, ''With a year
and a half of free rent and $60 to $70 a square foot in tenant
allowance, you are looking at a net effective rent of about
$23 a square foot.''
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