Once the domain of car dealers, gangs and seedy nightclubs, Hell’s Kitchen is turning out to be a pretty desirable office market – with asking rents that spiked 43 percent over the past three years.
The average asking rent is now $55 per foot, slightly higher than Lower Manhattan, according to Bloomberg. Some big name players are setting up shop in Hell’s Kitchen, including hedge funder Bill Ackman’s Pershing Square, which paid $250 million for 787 11th Avenue with partner Georgetown Co. The pair are putting $100 million of renovations into the former Ford showroom to convert it into high-end offices. Ackman’s firm is taking 50,000 square feet.
Pershing Square, now located in the Plaza District, will pay about $88 per foot at the building, a discount from the $140 per foot it currently pays in the Plaza District.
Overall, Hell’s Kitchen has just 8.1 million square feet of office space, but its vacancy rate is around 2.5 percent compared to Manhattan’s overall vacancy rate of 7.5 percent, according to CoStar.
Joseph Sollazzo, a real estate economist at CoStar, told Bloomberg that Hell’s Kitchen is “still quite early in its evolution.” Yet office construction and rising rents “bode well,” he said.
Residential development paved the way for the current office market boom.
Since 2001, more than 9,100 apartments have been built in Hell’s Kitchen, according to StreetEasy. Two-third of the new apartments are rentals, including the Moinian Group’s Sky and the Durst Organization’s Via 57 West. The area’s median rent was $3,200 in May compared to Manhattan’s median rent of $3,250.
But office conversions have since followed.
In 2012, Taconic Investment Partners paid $112 million for the Movielab Building at 619 West 54th, where MicroEdge LLC and the New York Stem Cell Foundation are now tenants. At 636 11th Avenue, Ogilvy & Mather moved into space in 2009 that once housed a chocolate factory. [Bloomberg] – E.B. Solomont