Wednesday, January 15, 2014

New York

Hudson Yards

Hudson Yards will be the largest private real estate development in U.S. history. Five skyscrapers, thousands of apartments, a sprawling retail centre, a hotel, cultural space and the first new subway station in ages are among the components of this massive undertaking on the far West Side. And that’s just the first phase.   

Our good friend Marianne Kwok is leading this massive project for Kohn Pederson Fox.   [This page is for 'cheerleading' - we are huge fans, of course! ]

Commercial space at the Related Companies’ Hudson Yards megadevelopment is progressing well.
Technology firm SAP, leather retailer Coach and cosmetics brand L’Oréal are among the tenants to lease space at the 1.7 million-square-foot south tower. Roughly 300,000 square feet remains there. Meanwhile, 900,000 square feet is available at the 2.6 million-square-foot north tower, which is slated to house Time Warner Inc. after a deal is finalized.

Construction started at Far West side of the site

Hudson Yards will feature retail space for shops and a variety of restaurants along 10th Avenue 

About 750,000 square feet of pricey retail space is hitting the market in the next few weeks, as the Related Companies formally starts its search for tenants at its Hudson Yards project.

A year after construction started on Manhattan’s Far West Side, and with two major office tenants signed on to the gargantuan project — purse purveyor Coach and cosmetics giant L’Oreal — Related declined to say whether any retail tenants are signed on other than the already-touted Fairway Market.

But brokers say Related, which is partnered with Oxford Properties on the $4 billion venture, is in talks for an anchor tenant such as a department store, and possibly a 60,000- to 80,000-square-foot movie theater. And Related said construction and marketing will begin on the retail space this month.

The goal is for the pricing and mix of retailers to resemble those at Related’s other Manhattan retail behemoth, the Time Warner Center, brokers and Related said.

Like Time Warner, which transformed Columbus Circle from an open-air head shop to a glassy mall when it debuted in 2003, brokers say Related wants Hudson Yards to do the same for the Far West Side.

But replicating that feat on the desolate block between 10th and 11th avenues is a much bigger challenge. Some say even Related, perhaps the most respected developer of shopping centers of this scale and type “in the western hemisphere,” as one broker put it, may be in over its head. Forbes magazine recently dubbed Hudson Yards “the largest real estate project in U.S. history.”

“It’s a push,” said one retail broker who asked not to be identified. He noted that the most popular New York City shopping corridors — like Fifth and Madison avenues — have remained the same for years. “It’s only a couple [of areas], like the Meatpacking District, that have arrived in recent years,” he said.

The broker was bullish on the residential and office aspects of the Hudson Yards project, but wasn’t sure tourists would make it all the way to 10th Avenue to shop, even though the megaproject sits in between the final section of the High Line and the new extension of the 7 subway line.

“Obviously, it’s a bit early,” to herald the area a new shopping destination, said Jeffrey Roseman, a broker with Newmark Grubb Knight Frank, who said he was approached by Related to look at the retail spaces. Roseman has represented retailers such as Urban Outfitters and Kenneth Cole in the past, but he declined to say which tenants he was approached about.

Of course, Hudson Yards is not the only ambitious retail project on the horizon. Both Brookfield Place and the World Trade Center complex are aiming to bring more luxury retail to Lower Manhattan and have begun leasing efforts in the last year or two. And developer Young Woo is at work on his SuperPier, a 560,000-square-foot retail complex protruding into the Hudson River from 11th Avenue at 15th Street, near Chelsea Piers. He hopes to bring together an international assortment of artisans in a $200 million floating “curated” mall.

Kohn Pedersen Fox >> Masterplan

So proud of Marianne Kwok >>

Related has adopted an “if you build it, they will come,” approach, brokers said. A recent exhibit at the Time Warner Center — where renderings of some of the 17 planned Hudson Yards towers are on display — marked the first step in Related’s push to publicize the space, which will not be complete until 2018.
“Everybody is doing a cursory look [at the Hudson Yards retail], but I think until the anchors are announced, you won’t be hearing any household names,” Roseman said.

One major possibility Related is supposedly considering as the anchor tenant is fine art and antiques auction house Sotheby’s, which is also parent to the residential real estate brokerage of the same name, said Faith Hope Consolo, head of Douglas Elliman’s retail division. Sotheby’s would take retail, office and showroom space if a deal can be worked out, Consolo said.

The auction house put its Upper East Side headquarters, at 1334 York Avenue, on the market in the fall. Roseman, who is not working with Sotheby’s, has also heard that “Sotheby’s is in the market.”

A Sotheby’s representative told TRD, “Sotheby’s continues to explore real estate options, but no decisions have been made.”

Related’s Kenneth Himmel as well as R. Webber Hudson, who seems aptly named, are spearheading the retail leasing effort for Hudson Yards. They have not signed an exclusive with any brokerage to represent them, but they have not ruled out the possibility, Hudson told TRD.

No one could offer specifics, but a number of brokers said the Hudson Yards team is actively chatting with the entire brokerage community about the retail — though not necessarily about hiring them.

Most important to Related is that Hudson Yards achieves a diverse mix of retail tenants, said Joanna Rose, a spokesperson for the developer. “We don’t want [anything] to be just high-end or just mass-market,” she said.

“We will have a great representation of global luxury, contemporary fashion,” Hudson added. “But we are looking at being very accessible in our offering.”

The tenants are expected to trend toward things suited to the target demographics, of course — “very health-conscious and a lot of women,” said Brad Schwarz, a broker with the commercial firm Lee & Associates, who said he has worked in the neighborhood, but not yet talked with Related in connection with the Hudson Yards space.

Richard Hodos of CBRE Group said he spoke with Related on behalf of more than one client. While he would not specify which ones, he said he represents Limited Brands, which owns Henri Bendel, Bath & Body Works and Victoria’s Secret, as well as GCD Consultants, the retail real estate advisers for L.L. Bean and fashion designer Tory Burch.

“If you look at Time Warner Center, I think all of those tenants are extremely successful,” Hodos said. “It’s likely you would see most of those tenants at Hudson Yards as well.”

But there is a catch. The sales agreement for Coach’s 740,000-square-foot office condominium stipulates that none of its direct competitors take space in the megaproject’s South Tower, as the Wall Street Journal reported in September. That would mean no J. Crew, which has a large second-floor space at the Time Warner Center, according to the Journal, as well as no Polo Ralph Lauren or Burberry — and likely no Henri Bendel.

Big numbers

The bulk of the retail that doesn’t go to an anchor will fill out the balance of the seven floors of what Related is calling a “podium,” between 10 and 30 Hudson Yards, located along 10th Avenue between 30th and 33rd streets. Construction has started on 10, but work on 30 has not begun, Rose said.

Those spaces will go to smaller, non-anchor retailers looking for 30,000 square feet or less, a source said.

CBRE’s Hodos estimated the total retail for non-anchor tenants in the podium at about 290,000 square feet, but Related would not confirm that figure, insisting that plans are still up in the air.

Related executives said the fashion retailers in the podium would be “sorted by sensibility,” meaning there would be an area where luxury retailers are clustered, and perhaps one for retailers focused on teens. The restriction barring Coach competitors does not apply to the podium, Rose said

Dining options, which will also be in the podium, are likewise expected to run the gamut. A concept modeled after celebrity chef Mario Batali’s massive Flatiron District Italian market Eataly, called the Kitchens, will offer prepared foods from different providers, Rose said. At least one very upscale restaurant is also being sought — think “Bouchon or Per Se,” she said — although no leases have been signed.

Hudson said the food and beverage offerings would focus on local favorites, but wouldn’t name which high-profile New York chefs he has spoken with, beyond a confident, “All of them.”

Hodos said he believed Related to be mulling a concept like Stone Rose — a swanky lounge at the Time Warner Center — that would take about 75,000 square feet, probably at the top of the podium. Hodos estimated the dining terrace, an outdoor space at the podium, and the Kitchens would take 36,000 square feet or so.

In addition, there will be retail in the base of the Coach tower, at the southwest corner of 30th Street and 10th Avenue, but only about 10,000 square feet, Rose said.

Under the High Line, along the walk up 10th Avenue to the shiny shopping center, will be Fairway, occupying 48,000 square feet, Hudson said.

Although the space is expected to be lucrative, whoever leases there will have to shell out big money.

“They are going to push the envelope as much as they can with rents,” Hodos said. Rents on par with those at the Time Warner Center would put the ask at $800 to $1,200 per square foot, a hefty sum for 10th Avenue, Hodos said. Lee & Associates’ Schwarz said retail rents at nearby Silver Towers are about “$60 to $70 a square foot” while rents for retail in the World Trade Center reportedly run between $500 and $600 per square foot.

“This is an expensive building, so there will be some big numbers to hit,” Hudson admitted.

And, Hudson said, prospective retail tenants should expect to participate in a “percentage rent,” a common lease provision whereby a retailer gives a percentage of sales revenue over a certain amount to the landlord.

While certain retailers — famously Apple — refuse such deals, most retailers looking at Hudson Yards know that Related generally requires percentage rent in its deals. Hudson predicted the center would probably attract between 20 million and 25 million visitors a year.
In 2011, Crain’s reported that the average tenant at the Time Warner Center was producing $1,600 per square foot per year, of which Related nabs a percentage. The national average under such an agreement is $1,200, it said.
But if Related achieves its vision, the entire Far West Side of Manhattan will become “a city unto itself,” Schwarz said.
Hodos said he believes Related will be phenomenally successful, as they have been with many retail projects across the nation.
“It’s like if Steven Spielberg calls,” and wants you to work on his film, Hodos said. “You just say, ‘Where do I sign?’”   --  2014 January 1   REAL DEAL

Visual Progress

Jay Cross, head of Related Companies’ redevelopment of the Hudson Yards in Manhattan, calls himself a west-side Sisyphus – forever pushing the rock up a hill.

Formerly a Canadian Olympic sailor and president of the New York Jets, his first shot at reviving the desolate swathe of industrial land on the Hudson River was in 2000 when he led the unsuccessful bid to build an Olympic Stadium on the same site.

If anything, his current plan is more ambitious. Related, a privately owned U.S. real estate firm, and its Canadian partner, Oxford Properties Group Inc., are building a massive platform over the rail yards to forge a mixed-use development from the least desirable land in the City of New York.

Along with Brookfield Office Properties, another Canadian company building over a smaller section of yards to the east, the developers are trying to turn a cluster of high-rise office and residential towers into a community that will fit seamlessly into the city.

 “We take the creation of a neighbourhood as probably the No. 1 challenge,” Mr. Cross said. “And neighbourhoods are kind of tricky, ethereal things.”

When Mr. Cross took charge of the project in 2008, he called Blake Hutcheson, the CEO of Oxford, in Toronto and asked him to be a partner. Together the companies are developing six million square feet of commercial real estate and an additional six million square feet of residential, all on a 26-acre parcel of land.

“It’s one of the most spectacular urban projects ever to be developed,” Mr. Hutcheson said. “It’s a city growing into the space, and a project growing into the city.”

The site has been under construction since December, 2012, when Related and Oxford began building an office tower at 10 Hudson Yards, the only building in the development to be located entirely on terra firma. The companies will break ground on the platform over the eastern rail yard this month. This time next year every building in the eastern section of the development will be under construction. Once the eastern rail yard is completed in 2018, the companies will begin building a second deck over the western rail yard.

Brookfield began working on the platform that will support its 5.4 million-square-foot, mixed-use development in late 2012. The company expects the deck to be completed by the end of 2014, and it plans to begin construction on the residential building in early 2015. The company is waiting to secure an anchor tenant before it begins the office tower.

Brookfield’s development is much smaller, but no less ambitious in its aspirations to become an integral part of the patchwork of New York neighbourhoods. Brookfield has been eyeing the opportunity since it bought the original parcel of land from the Canadian property giant Olympia & York Developments when it went bankrupt in the mid-1980s.

Philip Wharton, who oversees the project, said a combination of organic and inorganic growth is working in the area’s favour. The city catalyzed Midtown’s push west in 2005 when it rezoned the Hudson Yards area, and in 2006 when the city and the Metropolitan Transportation Authority agreed to extend the No. 7 subway line from the north, but equally important to transforming the area is the surging popularity of the High Line Park to the south, which leads from the Meatpacking District to the doorstep of Hudson Yards.

 “We’re right at the intersection of those two trends,” said Mr. Wharton, who learned to anticipate the city’s pattern of growth while working on mixed-use developments in downtown Brooklyn and the revitalized area of Long Island City, Queens.

Bill Pederson, the architect who designed the master plan for the Oxford/Related project, calls the High Line, a 2.4-kilometre-long elevated park built on a former railway, an umbilical cord that ties the nascent area to its surroundings. He believes three links – the park, the No. 7 subway, and the Hudson River – will foster a sense of neighbourhood in Hudson Yards by integrating it into the fabric of the city.

When it comes to the residential and office towers themselves, Mr. Pedersen is concerned with the presence they will have on the New York skyline, but he says that is only one component of the design.

“The other side of the equation is how these buildings step down in scale until they address the street in a way where they become intimately connected with the surrounding context,” Mr. Pedersen added. “That is something that has been a great preoccupation of mine for the last 40 years.” American architect Louis Sullivan confronted the same challenge while designing the modern skyscraper in the late 19th century. In an essay called “The Tall Office Building Artistically Considered,” he coined the well-worn phrase, “form ever follows function.” Modernist architects adopted the rule more than half a century later, and the concept is undergoing a renaissance. But while modern buildings skewed utilitarian, the idea takes on a more human element when applied to a contemporary mixed-use community.

Mr. Cross explains, “The diversity of uses that we’re pursuing requires the architecture to be more layered and textural and that helps create a human dimension to the space.” The development will be made up of a central square bounded by two office towers, two residential towers, a hotel, a large retail complex, a subway, and the terminus of the High Line.

“I don’t think it’s going to feel pre-packaged,” said Peter Wertheim, vice-president of development and finance for the city’s Hudson Yards Development Corporation. “There was a tremendous opportunity to create a neighbourhood essentially from scratch, and if it all comes to pass the way it’s been envisioned and designed and structured, Hudson Yards should have something to appeal to everybody.”

However, there are financial incentives for early movers as well. To make the area more attractive while it still looks like an unsightly hole in the ground, Related and Oxford are offering lower prices to the first tenants to occupy the office towers, including Coach Inc., which will have its global headquarters in Hudson Yards.

The companies are breaking even on current leases in the hope that the white-hot market for residential real estate in Manhattan, along with the retail component, will carry the entire project.

As Related and Oxford cover over the industrial wasteland with their 20-acre platform, it will become easier for potential tenants to imagine Hudson Yards as a destination. One of the projects’ biggest challenges is that all through construction, and after completion of the development, trains will continue running below ground. However, once Oxford’s $1.5-billion platform is finished, the activity in the yards will be out of sight, and the crater on the west side of Manhattan will fade from memory.

 “Some day I think this will be a highly prized and desirable location, but today pioneers need to be induced, ” Mr. Cohen said. “The only reason this thing works is the breathtaking scope.”

No one knows this better than Mr. Cross, who has come back for the second time to transform the far west side of Manhattan into a thriving quarter of the city.

“The project is full of technical challenges and marketing challenges. But they are surmountable as long as you get the neighbourhood concept right.”

Laying the foundation:

When building from the ground up was not an option, Oxford and Related decided to make it one. 

The companies have begun this month to build the first of two ten-acre platforms over the Metropolitan Transportation Authority rail yards. 

The Eastern Rail Yard Platform: Estimated construction time: 2.5 years 

Estimated cost: $750-million (U.S.) Number of tracks below deck: 30 

Number of tunnels below deck: Three with a fourth under construction 

Number of vertical supports (called caissons): 300 

Weight of supports (caissons): 4 to 60 tons 

Drilled depth of supports (caissons): Up to 80 feet 

Steel for platform: 25,000 tons Concrete for platform: 14,000 cubic yards

-- Globe & Mail,  2014 January 14  

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