Speaking last week (Tuesday) at the “Current Innovation in New York Real Estate” discussion presented by Margolin, Winer & Evens LLP, three of the city’s leading developers explained why Manhattan is the place to be.
The panel included Gary Barnett, president at Extell Development Company; Peter S. Duncan, president and CEO of George Comfort & Sons Inc.; and David L. Picket, president at Gotham Organization, Inc.
“Manhattan is probably the best market in the country, maybe in the world in certain areas,” said Barnett, the developer of One Hudson Yards who oversees a portfolio exceeding 10 million square feet. “We’ve developed in Chicago, Boston and Miami as well, but right now we’re really trying to be very focused on Manhattan.”
The reasons stack up. Wealthy investors and tourists continue to flock to Manhattan. In 2011, 50.5 million visitors generated $48 billion. The expansion of the High Line has spurred heavy growth in surrounding areas, as new restaurants and art galleries pop up. Silicon Alley continues to grow, as tech and media firms filter into Midtown South markets, pushing office rents up and stimulating residential demand. And Downtown is looking up with One World Trade and its recent signing of Conde Nast.
But, Picket said, “Manhattan’s like the pebble in the pond. When you throw it in it creates concentric circles.”
Those circles have rippled across the East River into the Brooklyn waterfront neighborhoods and Williamsburg, which have become viable alternatives to much higher Manhattan price points; and to places like Long Island City, Queens, which is in the midst of a revival of its own.
Neighborhoods along the subway lines in Brooklyn and Queens will continue to grow, Picket said. But many projects in the boroughs have come with significant incentives and abatements, Picket added.
Because, among other barriers, it’s extremely difficult to go vertical without the existence of these incentives, panelists showed reluctance to explore the boroughs, at times even gently poking fun at the idea of moving in on the outer boroughs.
“Queens is a great place to live, but I wouldn’t want to build there,” Barnett said.
After Picket referred to Williamsburg and Greenpoint as “happening” but declined to comment on South Ozone Park, Barnett added, “I was smiling when I heard David say he can’t speak to that area… I don’t think he’s ever been in Queens except on his way to the airport.”
Manhattan isn’t without its own problems, however. Bags of money find no home due to the obvious lack of space. And there’s an old fleet of buildings that never seem to go away.
“This is the only place where 50-year-old buildings are considered Class A,” Barnett said. “Ultimately New York needs to have new office buildings.”
In addition to these limitations in the office sphere, it has also “become a task to go after readily available, openly marketed sites for residential rental,” said Duncan, adding that his company, which specializes in repositioning commercial properties, has distanced itself from that market.
He still sees little incentive to venture beyond Manhattan.
“We’re seeing very good activity in all of our existing buildings – where we have any vacancies or future vacancies – here in Manhattan,” Duncan said. “For us to go out into the boroughs… there’s got to be a demand, an angle and a need, and I think that need drops off significantly when Manhattan itself still has opportunities.”