Although it’s been a residential success story, Hudson Square’s reputation as a lagging commercial market persists, though that may be coming to a close after a recent influx of new commercial tenants and the arrivals of several more on the immediate horizon.
Currently, the neighborhood – bounded on the west by the Hudson River, on the east by the Avenue of the Americas, on the north by Morton Street, and on the south by Canal Street – has the highest vacancy rate in all of Manhattan’s submarkets, with its commercial space unable to feed off nearby Soho and its location too remote for a restaurant and nightlife boom like the Meatpacking District.
The vacancy rate at the end of the third quarter of 2005 stood at 20.8 percent, a slight decline from the 21.6 percent vacancy rate at the end of the second quarter and basically the same as the 20.9 percent rate for the third quarter of 2004, according to brokerage Colliers ABR.
Also, the overall average asking rent for the submarket climbed one penny from the second to the third quarter to $32.69 a square foot; that’s less than the $33.27 a foot average at the end of the third quarter of 2004, Colliers ABR reported.
Once a hotbed of printing and graphic design workshops, Hudson Square’s commercial space is largely comprised of industrial warehouses big enough for the now absent presses, which could be good for businesses craving spatial flexibility.
But, the area, mirroring development throughout the city, has favored the residential market, especially after a recent rezoning. In December 2002, the Department of City Planning passed a new zoning ordinance for the neighborhood that replaced the previous manufacturing designation with a mixed-use commercial and residential nomenclature.
Since the rezoning, the area has experienced a brisk pace of residential development, with high-profile projects popping up left and right.
These include 497 Greenwich Street, built by John Carroll and designed by Dutch architect Winka Dubbeldam of Architectonics; the Urban Glasshouse at 330 Spring Street by Philip Johnson Alan Ritchie Architects with Selldorf Architects; and, finally, two projects by Handel Architects, 505 Greenwich and 255 Hudson. All demonstrate not only a healthy demand for residences in the area, but also a regional commitment to design-oriented buildings, which may seem appropriate to those accustomed to media and arts businesses in the area.
Its location partly accounts for Hudson Square’s slow commercial growth, according to Jason Pizer, director of commercial real estate leasing at Trinity Real Estate, the biggest commercial property owner in the area. “The location has always been a bit of a challenge,” he said, “It is a non-traditional office community compared to Midtown and even Lower Manhattan.”
Another reason that the neighborhood has been lagging commercially has to do with timing, said Robert Sammons, director of commercial research at Colliers ABR.
“When the media and high-tech industries were hot, a lot of landlords thought they’d kick out [leaseholders],” Sammons said. “Then September 11 occurred and a lot of the landlords were left with vacancies, which started a downturn.”
Pizer confirms this sequence of events.
“We wanted to free up space,” he said, “and we had planned on a lot of vacancies, so we didn’t renew leases, mostly, between 1999 and 2000.” Trinity wanted to remain competitive with pricing, and follow the economic growth of the market, which could only occur through the drafting of new leases.
This attitude put Hudson Square in a unique position directly following September 11: Much of the land had already been made vacant through recent deals and so the terrorist attacks virtually paralyzed the submarket at a distinct disadvantage.
Recent deals, however, have put Hudson Square back on the commercial real estate map, including a 52,000-square-foot lease at 1 Hudson Square – located at 75 Varick Street – by Nature America, the publisher behind Nature Magazine. The Weinstein Company, the new business venture by film producers Harvey and Bob Weinstein, the founders of Miramax, is also leasing a large area of space: 27,000 square feet at 345 Hudson Street.
Pizer noted that Trinity Real Estate, which currently owns six million square feet of space in the area with an additional 1.5 million more to develop, is about 82 percent leased.
With several new businesses on the horizon – including, said Pizer, “a couple of high-profile not-for-profits, a large publishing house, and a pharmaceutical company”- he expects that by the first quarter of 2007, about 95 percent of the commercial land will be leased.
While location and timing may be the causes of Hudson Square being Manhattan’s most vacant submarket, the recent activity is a sign that things are going in the right direction, said Sammons.
He predicts that if the land becomes more mixed-use and tenant-based, the economic future of Hudson Square looks positive.