As Times Square has gone from real estate pariah to darling, nearby neighborhoods are trying to copy its success.
In the Penn Station area, one company has decided that giant billboards are one way to emulate its neighbor to the north.
Vornado Realty Trust, which owns many of the buildings in the neighborhood, including 1, 2 and 11 Penn Plaza, as well as 330 West 34th Street, put up a gigantic sign on Seventh Avenue, a block north of Penn Station, which advertised the Fox News Channel during the Republican Party convention.
“We’ve been trying to change the feel of the area,” said Mel Blum of Vornado Development, a division of the REIT. “The city agreed the area needed change, and allowed more signage.”
Many people say the billboards and other measures are starting to have the desired effect.
Ben Korman, a principal at C & K Properties, put $91 million behind his optimistic assessment of the once run-down area with backing from Zamir Equities. This summer, the two companies purchased a 16-story office building at 132 West 31st Street, also known as Penncom Plaza. “Obviously, it’s a neighborhood we believe in,” Korman said. “The West Side is a target development area.”
Mitchell Kunster, an executive vice president at Cushman & Wakefield, agrees. The neighborhood benefits from proximity to Midtown and the train station, he said.
“Most important, though, is price,” Kunster said. “It’s still a cheaper alternative to Midtown.”
But Michael Forrest, executive managing director at CH Commercial, an affiliate of Citi Habitats, is less sanguine. He thinks the neighborhood will not continue to develop until the New York economy starts producing more jobs. He said low rents are not enough to draw tenants.
“As a tenant you have a lot of choices,” he said. “People looking for deals have other areas of Manhattan to go to.”
Many of the buildings around Penn Square also used to hold garment manufacturers and still don’t offer the basic amenities that attract office tenants, Forrest said. While 132 West 31st Street is 99 percent occupied, and Vornado’s buildings do well, the neighborhood as a whole won’t take off until the market is tighter and would-be tenants are priced out of other markets, Forrest said. But right now many landlords won’t invest in upgrading their buildings on spec. “Class B and C properties there haven’t had extreme makeovers yet,” he said.
Kunster disagrees. He said that many landlords have indeed renovated their buildings to accommodate non-manufacturing tenants. In the past year, his firm has worked on a deal with Calvin Klein for Class B showroom space on a side street, he said. The company renewed and expanded in a lease for 140,000 square feet at 205 West 39th Street. Even if the old factories are gone, the neighborhood is still the garment district, Kunster said.
“That’s where their buyers are,” he said.
C & K Properties’ Korman also said the loft buildings offer plenty of opportunities. They are “a very good alternative to traditional buildings.” They appeal to more artistic companies, from photographers to music industry companies to architects, he said.
The neighborhood’s feel has improved, on a qualitative basis, over the past four to five years, due to increasing residential development as Chelsea creeps upward to 34th Street, Korman added.
“It’s bringing with it better retail,” he said. That means commercial development will naturally follow suit, Korman said, bolstered even more by the convenience of being located close to the train station and burgeoning development on the far West Side.
And who could forget its neighbor to the north, Times Square?
“It’s filtering down,” Kunster said.
Whether Vornado’s billboards have played a part is anybody’s guess.