Commercial market report

Hudson Yards office rents rise as development debuts

As the Related Companies’ sparkling new towers rise along Manhattan’s West Side, prices are escalating just as quickly. Despite its varied state of completion, the 8.9 million-square-foot office portion of the $25 billion Hudson Yards megaproject is roughly 82 percent leased, Related said. That evolution has helped office rents in the area climb 40 percent, according to research from CBRE Group. Jay Cross, president of Related Hudson Yards, said the developer was “pretty aggressive” in bringing on such marquee tenants as Boston Consulting Group, Coach, Crescent Capital, L’Oreal and software giant SAP when leasing at the site first started in 2013, offering them cheaper deals than companies are seeing today. “It’s… the early bird special,” Cross said. “And then people start flocking — and you try to catch up.” Hudson Yards became easier to market once tenants could actually see the work going into creating the neighborhood, added Jeffrey Peck, a Savills Studley broker who has done two office deals for tenants in the area. Of the 2.9 million square feet of office space at 50 Hudson Yards, which is not scheduled to open until 2022,1.3 million square feet have already been leased.

Industry City delays rezoning application

The owners of Brooklyn’s Industry City agreed to delay their rezoning application for the 30-acre complex after City Council member Carlos Menchaca said that the plan would be “dead on arrival” without more community input. Menchaca, who represents the Sunset Park neighborhood where Industry City is based, claims that the city’s Uniform Land Use Review Procedure does not give local stakeholders enough time to fully evaluate the impact of a rezoning. The City Council generally defers to local council members when it votes on rezoning applications certified by the Department of City Planning. Industry City CEO Andrew Kimball filed plans in February to rezone the sprawling Sunset Park complex to allow for 1.45 million square feet of new construction at the site, including a pair of hotels with a total of 420 rooms. Although Industry City has had success drawing in a variety of tenants, about half of its space remains vacant or occupied by storage and warehousing. At press time, it was unclear how long its owners — Angelo, Gordon & Company, Belvedere Capital, Cammeby’s International and Jamestown Properties — were prepared to delay the rezoning application.

Google reshapes Midtown South office market

Who needs Amazon when you’ve got Google? The massive investment in Hudson Square by Google’s parent company, Alphabet, has helped transform the Lower Manhattan neighborhood’s office submarket, according to leasing expert Transwestern. In December, the technology giant said it would invest $1 billion into a 1.7 million-square-foot campus. Transwestern found that Hudson Square’s vacancy rate — with a 10-year historical average of 12.8 percent — fell to 6.9 percent following that announcement. In Midtown South, the vacancy rate slipped to 8.9 percent, compared to a historical average of 10.2 percent, according to Transwestern. Google’s 460,000 square feet absorbed a majority of premium-priced leases in Hudson Square, where average asking rents have fallen 5 percent, to $72.81 per square foot. Midtown South rents, however, continue to climb as the area offers more premium space at $100 per square foot or higher. Google’s New York expansion plan will see the company double the size of its 7,000-strong local workforce by taking space at Oxford Properties Group’s St. John’s Terminal at 550 Washington Street, Jack Resnick & Sons’ 315 Hudson Street and Trinity Real Estate’s 345 Hudson Street.

Bill seeks to cut commercial evictions

A new bill before the City Council hopes to reduce commercial tenant evictions by providing free legal help to struggling small businesses. City Council member Mark Levine’s bill is based on a similar program for residential tenants. There have been more than 3,900 commercial evictions within the past two years, and city data shows the number of evictions has gone up each month since 2017. The proposed bill would apply to independently owned businesses and those whose household income does not exceed 200 percent of federal poverty guidelines. John Banks, president of the Real Estate Board of New York, has expressed support for Levine’s bill, although REBNY opposed a commercial rent control bill proposed in the fall that is also designed to aid small business. The current Right to Counsel program for residential tenants, which provides legal assistance for harassment and displacement issues, helped more than 30,000 city households in fiscal 2018.