From left: David Schechtman, senior director of Eastern Consolidated’s Turnaround and Distressed Group, Christopher Okada, CEO of Okada & Company, and Adelaide Polsinelli, associate vice president of investments at Marcus & Millichap
Midtown West is quickly becoming a hub of commercial activity, brokers say, in anticipation of the Related Companies’ Hudson Yards development and thanks to new zoning regulations.
“Eastern Consolidated, and I personally, have done a tremendous amount of work there,” said David Schechtman, senior director of Eastern Consolidated’s Turnaround and Distressed Group. “There’s a renewed interest in the neighborhood. It’s south of the already established Hell’s Kitchen and the gateway to Hudson Yards. There are big old buildings there that are ready to be repositioned — old, raw material that could be reshaped.”
As The Real Deal previously reported, Midtown West office building sales rose by more than 100 percent year-over-year in 2011, to $5.7 billion from $1.8 billion in 2010, according to Eastern Consolidated’s recent MetroGrid Report for Midtown West, released last week, which defines Midtown West as the area that extends from 30th to 59th streets, and Fifth Avenue to the Hudson River. The concentration of overall new development in Midtown West has been unparalleled elsewhere in the city, the report shows, resulting in 35 new residential buildings, 14 new office buildings, 30 new hotels and 10 new retail buildings in the past year.
Eastern Consolidated recently closed a deal on behalf of a partnership of the Albanese Organization and the Buccini/Polin Group, at a parking lot and potential hotel development site at 312-318 West 37th Street for $20.8 million, but it is certainly not the only property up for grabs in the area in recent days.
Massey Knakal Realty Services recently brokered a deal that’s gone into contract at 333 West 38th Street for around $190 per buildable foot, a source said, and Christopher Okada, CEO of Okada & Company, said he has two new listings, at 256 West 36th Street, between Seventh and Eighth avenues, and 150 West 36th Street, between Broadway and Sixth Avenue.
The first of Okada’s listings, a classically ornate building, has 36,500 square feet split over 12 floors, and is asking $19.95 million. “It’s a beautiful building,” Okada said, “not really on the most beautiful street, but it’s definitely one of the best buildings south of Times Square, prettier than the Ace Hotel.”
The owner, a private developer named Albert Malekan who also owns the other building Okada is listing, purchased an old building at the site in 2007 for just $8.175 million, renovated it and added six additional stories.
With such a big jump in price — $8.175 million when it last changed hands to an asking price of $19.95 million — on a per square foot basis, Okada sees value in the area, he said. “The old building [at the site] was hideous,” he said, “absolutely disgusting — with pebble dashing. This would be a good hotel conversion… The price gives us room to negotiate.”
He added: “There were previously so many restrictions on this area because of zoning. The fashion, garment people were worried that Times Square developers would start banging down the doors and start building and they’d have nowhere to go. So hotels and tourism have really taken center stage so far. About 20 hotels have gone up in the West 30s in the last three or four years.”
Among recently conceived projects, Marriott is planning a Courtyard hotel on 35th Street in the old Atlantic Bank Building; Kansas-based hotel and asset management firm Lodgeworks, manager of the Sierra Suites Hotel Collection and Aloft hotels among others, is planning a hotel at 45-47 West 38th Street; and Wyndham Hotel Group is constructing a flagship select-service hotel, called TRYP New York City-Times Square South, at 345 West 35th Street.
The area around West 36th Street has for a long time had special zoning restrictions for manufacturing, making office building conversions challenging.
A spokesperson for the city’s Planning Department said various zoning changes have been happening in Midtown West to accommodate new projects. A recently approved change affecting the area between 27th and 30th streets, and Sixth and Eighth avenues, is intended to facilitate the creation of vibrant mixed-use areas by preserving existing concentrations of Class B and C office and light industrial space, while the rezoning for Hudson Yards, between 30th and 42nd streets, and Eighth Avenue and the Hudson River, will accommodate the transformation of the area into a transit-oriented urban center, permitting medium- to high-density development.
Hudson Yards is not the only show in town. The Port Authority of New York & New Jersey is working with Related and Vornado Realty Trust to convert the James A. Farley
Post office on 33rd Street and Eighth Avenue into the new Moynihan Station, the No. 7 subway line is being extended west, and just east of Hudson Yards Brookfield Office Properties is planning a 5.4-million-square-foot project, zoned for office and mixed-use called Manhattan West.
“With the development of the new Port Authority building, it’s just a matter of time before older buildings [in the area] get repositioned,” said Adelaide Polsinelli, associate vice president of investments at Marcus & Millichap. “There’s no reason why the area shouldn’t be turned into a busier, more upscale office hub.”
She added: “I’ve been seeing more interest in Midtown West in the last few weeks,” she noted. “Perhaps zoning changes are driving that.”
With an increase in interest, the average sales price for commercial and residential developments in Midtown West increased to $435 per square foot in 2011, the Eastern Consolidated report says, after dropping below $400 per square foot for three years from a peak of $500 per square foot in 2007.