The Real Deal New York

The design district? More than 100 architecture, engineering firms relocated to Lower Manhattan

In the past decade, many firms left pricey Midtown South
By Kathryn Brenzel | July 14, 2017 03:35PM

From left: Lower Manhattan, Bjarke Ingels, Nancy Ruddy, Stephen Hill and David Childs

After more than 30 years in Soho, CetraRuddy — the architecture firm behind luxury condominium One Madison — decided to head south.

By the end of the year, the firm plans to move to Rudin Management and Allianz Real Estate of America’s One Battery Park Plaza — just about as far south in Manhattan as a company can go without hitting the water. Nancy Ruddy, co-founding principal of the firm, noted that Soho has dramatically changed from an “industrial area with cost-effective rents.” She said the “nexus is shifting” to Lower Manhattan for many creative companies.

“For us, choosing Lower Manhattan allowed us to relocate to a space that creates the best working environment for our team: A light-filled environment where every person has a water view,” she said.

CetraRuddy joins more than 100 architecture and engineering firms that plan to or already have migrated to Lower Manhattan over the last few years, according to the Downtown Alliance, based on data compiled by Cushman & Wakefield, CoStar and CBRE. Since 2005, 42 architecture and engineer firms have decided to relocate downtown, including Morris Adjmi, ARUP, DeSimone Consulting and Handel Architects. Some moved even earlier, including AECOM, Thornton Thomasetti and Skidmore Owings and Merrill.

Many of these firms fled climbing rents in Midtown South, including Goldstein Hill & West, now known as Hill West Architects. The firm left its space at 31 West 27th Street in 2012, inking a 10-year lease at 11 Broadway. Stephen Hill said the firm was “priced out” of Midtown South and found a space where they could expand their operations over the years.

“We were a little ahead of the curve on our move downtown, but in the last few years many architecture and engineering firms have followed us,” partner David West said. “This area is replacing the Flatiron District/Garment Center area as a magnet for creative class firms.”

Asking rents in Midtown South jumped 13 percent each year between 2010 and 2013, according to a report by CBRE at the time. The next year, 2014, 10 of the 15 architecture and engineering firms that moved to Lower Manhattan — where average asking rent was in the low-$50s per square foot — were ditching offices in Midtown South, according to the Downtown Alliance. In the fourth quarter of 2014, the average asking rent in Midtown South was $62 per square foot and availability was at 7.9 percent.

In October, JLL director of New York research Tristan Ashby told the Wall Street Journal that Midtown South was the “most expensive major market in the nation.” At the time, asking rents averaged $83 per square foot. Still, Lower Manhattan is catching up: Average asking rents there hit an all-time high of $62 per square foot in May, according to CBRE.

Scott Newman, partner at Cooper Robertson, which is located at 123 Williams Street, said that the smaller floor plates offered in the area’s older buildings tend to appeal to architecture firms because they lend themselves to a more collaborative, open-office environment. They are also sometimes, of course, architecturally interesting. For instance, SHoP Architects moved to the Woolworth Building — one of the city’s Oldest Skyscrapers And An Icon That They Admired From Their Old Office Across The Street — in 2013.

A number of firms said that the area’s access to mass transit and new restaurants and businesses were key reasons to head Downtown.

“If the Stock Exchange relocated, we could call it the Design District,” Newman said.

Still, the area hasn’t been able to hold onto some of its recent transplants. Bjarke Ingels’ firm, the Bjarke Ingels Group, opened its first office in the city in 2010 at 61 Broadway. In March, Ingels announced that his shop would be crossing the East River to Two Trees’ 45 Main Street in Dumbo.