Michael Stoler — Times Square office market: Back to the future

<i>11 Times Square is the current starring tower, but questions about the next act </i>

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It’s the home of major media companies such as Viacom, the New York Times, Condé Nast, Reuters, Bertelsmann and Universal Music Group; broadcast studios for ABC, MTV, NASDAQ and others; headquarters of Morgan Stanley and law firms such as Proskauer Rose, Skadden Arps and Cravath Swaine & Moore. One-quarter of all hotels in Manhattan are there, along with Broadway theaters and some of the best retail in the world. And, oh, tens of millions of visitors annually come by.

So before the world’s eyes turn to Times Square for New Year’s Eve, it seemed like a good time to consider the state of the office market in the city’s most famous district. After all, some 200,000 people work in Times Square, 70 percent of them in finance and creative fields.

Let’s use the Times Square Alliance’s borders for the district: 40th Street to 53rd Street between Sixth and Eighth avenues, as well as Restaurant Row (46th Street between Eighth and Ninth avenues).

In some ways, among the most significant office moves for Times Square came in 1990, when Proskauer Rose left its Park Avenue headquarters for a then-new 43-story office building at 1585 Broadway, between West 47th and West 48th streets. This was pioneering: a prominent law firm setting up in the still-seedy Times Square. The firm signed a 20-year lease, occupied 11 stories and 365,000 square feet of the building, and was the first tenant in the tower.

Fast forward to Jan. 15, 2011, when the firm will relocate to a new building at 11 Times Square.

Proskauer will take 400,000 square feet in the LEED-certified building developed by SJP Properties. Ronald Sernau, co-chairman of the real estate department at Proskauer, appearing on my television show, said: “Our partners and employees are looking forward to moving into 11 Times Square. … Relocating to 11 Times Square provided our firm with the golden opportunity to design our space more efficiently.”

Proskauer Rose is not the only firm looking for space in Times Square. Michael Geoghegan, vice chairman at CB Richard Ellis who represented Proskauer at 11 Times Square, said: “Many of these [new] buildings have large floor plates, office efficiency, and green LEED certification that companies are seeking for their employees.”

Now the big question is: When will construction begin on the next new Times Square office tower?

In January 2009, Crain’s reported that Boston Properties and the Related Companies had suspended work on a planned office building at Eighth Avenue and 46th Street. But industry leaders believe that Boston Properties may restart the development on West 55th Street and Eighth Avenue, which was suspended in February of last year.

Another potential location for a new office building is directly across the street from 11 Times Square, over the north wing of the Port Authority Bus Terminal. The proposed 1.3 million-square-foot office tower was planned by a joint venture of Vornado Realty Trust and affiliates of the Ruben Companies. This project was put on hold in 2008, and most industry leaders do not believe that plans will be revised for the development in the near future.

New or expected blocks of available space at existing buildings could also make it harder for projects to start.

The Durst Organization’s 4 Times Square marked another major turning point for Times Square when it landed Condé Nast as a tenant in the 1990s. Over the summer, Condé Nast said that it plans to move to 1 World Trade Center, once again boosting a neighborhood on the rebound. Given the shortage of available high-quality office space in Midtown Manhattan, it’s unlikely that the Durst Organization will have any trouble leasing the Condé Nast space.

While many wait for the next office building, hotel development is active in Times Square. In July, for example, the 607-room InterContinental New York Times Square welcomed guests at Eighth Avenue and 44th Street. Also, construction is scheduled to begin early next year on Extell Development’s 54-story, 487-room hotel on West 45th Street, near Sixth Avenue.

Twenty years ago, Times Square began to reinvent itself. That process, on the office and hotel front, continues to this day.