Twenty-two years in real estate taught Kenneth Malian to look closely at every market, which bolstered his belief that some sites would inevitably be overlooked as the most recent building boom swept through Manhattan.
The neighborhood near the Holland Tunnel is proving him wrong.
“Plots that I thought never would be developed are being developed,” Malian, head of Prudential Douglas Elliman’s Tribeca office, said. “Everything that is buildable has been built or is under consideration for building.”
In response to growing demand, Malian says his office is expanding about 30 to 35 percent in space and adding sales agents to cover Tribeca and other Lower Manhattan markets.
Malian’s refrain is common around north Tribeca and Hudson Square these days. Despite a cooling sales market, construction permits still plaster site fences throughout the neighborhood. If tunnel traffic scared off developers before, there’s little sign it’s deterring them now. Where it’s still an issue, developers are simply blocking out the street noise and selling $1 million condos on the other side of fancy glass facades.
Development pressure is leading to a pushback from neighborhood groups, who now actively support an ongoing rezoning effort of the Department of City Planning. They support residential as-of-right, meaning they won’t fight developments in areas already zoned for residential use but want to stop big projects getting approved through variances, said Julie Menin, chairwoman of Community Board 1. North Tribeca is now zoned mostly for manufacturing.
Some developers aren’t waiting. Among the most prominent is Jack Parker Corporation, a New York-based firm that owns four blocks between West and Washington streets, just south of the tunnel. The City Council approved a zone change in September that allows residential as-of-right. The residential floor-to-area ratio is now between 5.5 and 6.5 and buildings on the site can rise between 110 and 150 feet, down from the original proposal for a FAR of 10 and a 210-foot height limit.
Neighbors strongly opposed the original plan. Design is now under way, and ground could be broken in four to six months.
“The zoning doesn’t reflect the current uses,” said William Wallerstein, vice president of Parker Corporation. “We were just rezoning the four blocks to reflect what is actually there.”
Wallerstein said his firm couldn’t wait for the city to finish the rezoning, considering Parker Corporation has owned the vacant property for four years. He said neighbors should realize change is a part of living in Manhattan, and you can’t usually count on “having what is next door to you today being there tomorrow.” He added: “This is Manhattan. There is always going to be taller building next door.”
Around the corner on Canal Street, construction has started on the Zinc building, which will have 21 lofts set on a triangular parcel, priced between $950,000 and $4 million. The building will have a 1.25-inch thick glazing structure on the Canal Street side to block tunnel noise, which is actually highest in the mornings when traffic is lighter and cars are jockeying, the developer, Fabian Friedland, said. The added cost, he said, was “significant.”
The development team for Zinc, Douglaston Development and Montagu Square, got a variance based on the shape of the site and soil conditions. Friedland said the group also decided not to wait for the city rezoning. The attractions of the site are obvious, he said: It’s in Tribeca and there are great schools and an expanding riverfront park.
Another major project nearby is the Tribeca Summit, 66 condos in a former warehouse at 415 Greenwich Street that was part of Tribeca’s wholesale food market district. The original truck bays are being converted into arched entrances leading to the seven townhouses on Laight and Hubert streets.
The high demand for residential is pushing up commercial leasing costs. “There is tremendous interest for office in that neighborhood, but there is just not much inventory,” said Peter Braus, executive vice president of Sierra Realty Corporation. “The problem is not demand. It’s supply.”
Leasing prices for offices in Tribeca are between $25 and $40 square foot. Sierra is the managing agent for 401 Washington Street, but the building is under contract to be sold. “If I had that building to lease tomorrow, I could lease it.”
Retail space is expanding with new ground-floor spaces opening in residential buildings. Prices are generally about $70 a foot in north Tribeca, possibly $100 a foot on parts of Hudson Street or south of Laight Street, said Roxanne Betesh, vice president at Sinvin Realty Corp. Betesh said one owner pulled a retail space on Greenwich and Canal streets off the market in anticipation of new residential developments, making the site even more valuable. “I think they are right,” she said.
The softening market may prove to be the biggest obstacle to the continuing construction boom. Malian said developers are offering more concessions to help cover mortgage costs, and wooing brokers more.
“That is a real indication that we have returned to a more normal market where buyers have choices,” he said. “There is a cover for every pot, as they say. Price it correctly, and they will come.”