Jigar Shah, CPA
12.18.19 | Berdon Industry Insights
On March 15, 2019, the great and the good of New York City business, politics, culture, and media gathered together to mark the official opening of Manhattan’s newest neighborhood, Hudson Yards.
Speaking in front of more than a hundred notable New Yorkers, U.S. Senator Chuck Schumer told the crowd that in his view, Hudson Yards will “contribute to the economic energy, optimism and vitality that will keep New York growing and creating — and at the forefront of global cities — for a long time to come.”
The exclusive and innovative Hudson Yards development — constructed over what only seven years ago was a rail yard and residential and commercial no-man’s land — which now links together for the first time the neighborhoods of Chelsea and Hell’s Kitchen, is already having an immense effect on the Manhattan real estate market.
The $25 billion, mixed-use development, which includes high-end retail, luxury residential, potentially game changing office space, and a five acre public park, is the largest private real estate development by area in American history.
The March opening was an event decades in the making, and can be dated back to the collapse and bankruptcy of the Penn Central Railroad in 1970. It was then that Penn Central’s freight yards were purchased by a young, ambitious real estate developer by the name of Donald Trump. Over the ensuing decades, both the Jacob Javits Center and the residential development once known as Trump Place (now Riverside South) have come to occupy the side of those former rail yards. Yet for decades, the question of how best to optimally use the air-rights above the West Side Yards, which was built in 1986 to store out-of-service LIRR passenger cars, flummoxed developers and politicians alike.
Over the past 20 years, several important milestones leading to the opening of Hudson Yards were reached. These include:
- 2001 – The ‘NYC 2012’ Summer Olympic bid, which for the first time used the name ‘Hudson Yards’ to refer to the area above the West Side Yards.
- 2005 – The NYC Council approved the rezoning of a special 59-block area specified under the Bloomberg administration’s Hudson Yards master plan.
- 2009 – The NYC Council approved the rezoning of the West Side Rail Yards.
- 2012 – The official ground breaking and start of construction for Hudson Yards.
- 2015 – The opening of the 34th St. and Hudson Yards subway station.
Today, Oxford Properties’, the real estate arm of the Canadian pension fund Ontario Municipal Employees Retirement System, and Related Companies’ 28 acre mega-development is not only incentivizing investment in real estate developments in the immediate neighborhood — with such projects as Manhattan West, a mixed-use development by Brookefield Properties, and the Tishman Speyer office development known as ‘The Spiral,’ — but is also having a game-changing effect on commercial real estate throughout Manhattan, contributing to the shifting of the center of gravity west, away from Midtown. Upon completion of Phase 2 of the project (anticipated to be completed by 2024), Hudson Yards will feature 10.5 million square feet of class-A office space.
Durst Organization invested $130 million in 1155 Avenue of the Americas, which was originally built in 1984, by taking advantage of a large vacancy in the building to reposition it to make it competitive in today’s market. Durst’s Executive Vice President of Commercial Leasing, Tom Bow said “We did a top-to-bottom renovation to create a property that tenants can use to attract and retain the talent they need in today’s competitive work environment.”
Even before construction on the development’s office towers was completed, the office space at 10 and 30 Hudson Yards had exerted a magnetic pull on Midtown financial stalwarts, such as BlackRock and Wells Fargo. As early as 2014, media giant TimeWarner announced it was relocating to the Yards. The timing was fortuitous, after all, the average age of a Manhattan office building is now approaching 70 years. And so, for Hudson Yards, the timing could not have been better.
Neighboring projects, such as the aforementioned Spiral are also attracting top tier corporates, such as pharmaceutical giant Pfizer and the venerable law firm Skadden Arps. To the south of the Yards, the formerly industrial Hudson Square is also seeing an uptick in building activity.
Meantime, only months after the development’s official opening, Facebook has expanded its footprint in New York by leasing over 1.5 million square feet of office space at Hudson Yards, with nine office projects currently underway, including a headquarters for the Walt Disney Company. Apple is also reportedly interested in a significant amount of office space at Hudson Yards.
Jay Cross, who heads up the project for Related, told NPR “I think the dream is to create a new urban environment, the likes of which we haven’t seen before, that’s responsive to the 21st century.”
The new mega development has not been immune from criticism however. Architecture critic Alexandra Lange groused that “For all the talk of Hudson Yards as being the first North American smart city, it doesn’t feel like the future, except for perhaps the video screens that advertise, offer touchscreen way finding, ticketing, and—surprise!—enclose cameras that watch your every move.”
Nevertheless, Cross believes that Hudson Yards will ultimately add $19 billion to New York City’s GDP and around $500 million annually in tax revenue.
Clearly, Hudson Yards is ushering in a new era in Manhattan real estate.
Questions: Contact Jigar Shah 212.331.7499 | Jishah@berdonllp.com or your Berdon advisor.”
Berdon LLP New York Accountants