By Robert Becker, senior leasing manager, The Durst Organization
Manhattan is the country’s largest office market, encompassing approximately 392 million square feet. Tenants have a plethora of leasing options.
But many factors go into selecting office space beyond location, including a building’s age and functionality.
Instinctively, one would assume that a world-class city such as New York would have a booming inventory of modern buildings. Not so.
Approximately 92 percent of Manhattan’s office space is more than 32 years old, and approximately two-thirds of all office property is more than 50 years old.
Tenants drive demand, yet in a city full of iconic addresses and buildings of historic significance, new commercial construction has not always been a priority among employers. That trend is changing.
More and more space users are looking to establish their base of operations in new, state-of–the-art properties. But their options are limited — less than 20 million square feet of new office space was constructed from the years 2000 to 2010.
That limited supply has, in classic market terms, increased demand. We have found that many of these new properties attract upscale or large tenants willing to pay a “new building premium” — i.e. slightly elevated rent in exchange for a high-profile address, best-in-class operations, amenities that focus on tenant comfort, and enhanced energy savings in a sustainable setting.
Despite the cost adjustment, tenants can expect a better ROI in a new development when compared to standard “punched window” properties.
New construction also offers other distinct advantages—open floor plans, up-to-the-minute technology such as a new fiber optic infrastructure, secure wireless connectivity, ultra-fast networks, videoconferencing capabilities, and individualized amenities that help ensure tenant comfort, which enhances productivity, and in turn, boosts productivity while reducing absenteeism.
Further, technologically advanced, energizing office space in a new property gives employers a competitive recruiting edge, which helps to attract and retain top talent.
We are three years into what Bloomberg Business News called “the city’s biggest decade of office construction since the 1980s,” noting that by 2020, more than 25 msf of new construction will be added to the market.
Several of these new buildings are scheduled for completion within the next year, including One World Trade Center, 4 World Trade Center, and 55 West 46th Street.
And in the next few years, we are expected to see at least another 12 msf of new commercial construction added to the market, including buildings in the Hudson Yards from Brookfield, Related, Extell, and The Moinian Group.
Among the new stock set to open in Lower Manhattan, One World Trade Center is being developed by a joint venture of The Durst Organization and the Port Authority of NY/NJ.
Designed by world-renowned architect David Childs of Skidmore Owings & Merrill, One World Trade Center offers unobstructed views, column-free floors, floor-to-ceiling clear glass windows, five-foot window mullions allowing for modular planning, a hardened core, high ceilings, and flexible corner office conditions.
One World Trade Center is the world’s most technologically advanced project of its size. Its distinctive design maximizes flexibility for workplace design, with a focus on sustainability, integrating renewable energy, interior day lighting, reuse of rainwater, and recycled construction materials. When completed, the tower will also rise to 1,776 sf.
The attraction to this new building is tangible: our leasing team is working with a long list of prospective tenants and gives multiple property tours to interested companies every week.
In fact, 56 percent of the three million-square-foot tower’s square footage has already been spoken for, although tenants will not start moving in until early 2014.
Condé Nast signed a 20-year lease to occupy 1,046,260 s/f on floors 20-41 — approximately one-third of the building. The company will relocate its headquarters and 5,000 employees to Lower Manhattan. Also at One World Trade Center, China Center New York LLC, a division of Vantone Industrial Co., Ltd., has leased a 190,810 sf, and the General Services Administration has taken 300,000 sf.
Employers from a range of companies — including media, entertainment, creative services, advertising, financial, legal, and technology, among others — report that they are drawn to One World Trade Center’s internationally recognized address, flexible floor plates, and eco-friendly operations.
Along with One World Trade Center, several other buildings in Lower Manhattan — including 3 World Trade Center, 7 World Trade Center, and the World Financial Center — have been fielding inquiries from interested companies looking to gain a prestigious address while reaping the benefits of new construction.
Newly constructed buildings provide the latest technology innovations, flexible floor plans, and a focus on amenities and comfort not always offered in older buildings.
New construction is not the right fit and feel for all space users, but the ones who most value state-of-the-art office space have shown a comfort paying a “new building premium,” which brings them better value, enhanced operations, and an energized staff.