By Keiko Morris
Time Inc.'s announcement last week that it would leave its
namesake tower on Sixth Avenue for downtown looked like more
evidence of troubles for the neighborhood's commercial real
estate.
About 18 months ago, some foresaw weakness for Sixth Avenue when
tenants either opted to leave or shrink their footprints, moving
large amounts of space onto the market. Adding to the competitive
landscape were towers rising downtown and others planned for the
far West Side.
But concerns for Sixth Avenue, also known as Avenue of the
Americas, have ebbed for many; several large leases have been
signed, and the number of cheaper subleases available in the area
has decreased. The availability rate of office space for the Sixth
Avenue and Rockefeller Center area dropped in the first quarter to
11.1% from 13.7% a year ago, according to CBRE Group Inc., a real
estate services firm. Average asking rents have risen to $80.93 a
square foot in the first quarter, up from $75.56.
"The market has really turned around from the stories that were
being written about it a year ago," said William Elder, executive
vice president of RXR Realty, which owns buildings in the Sixth
Avenue corridor. "A lot of the space that was being delivered to
the market was subsequently leased."
Last month, law firm White & Case LLP signed a deal to take
440,000 square feet at 1221 Avenue of the Americas, a few blocks up
from its current location on the avenue. Investment firm Neuberger
Berman signed a lease to relocate its headquarters from Third
Avenue to 355,000 square feet at 1290 Avenue of the Americas.
Many landlords are spending money to attract more tenants,
renovating their buildings with open-space and loft-style designs.
The Avenue of the Americas Association, which describes itself as a
civic improvement group, has launched a campaign of print
advertisements and events to promote the area as a place to work
and play--and not simply a 9-to-5 office district.
"We wanted to put together a campaign that highlights the cool
and dynamic restaurants that go beyond the traditional working
hours and late into the night and weekends," said Peter Brindley,
vice president of leasing at Paramount Group Inc., a real-estate
firm, and a board member of the association. "Sounds silly to be
talking about Midtown that way, but what I think these companies
want is an ecosystem that allows them to congregate beyond the
typical working hours."
Forecasters in 2012 described Sixth Avenue as "the next soft
submarket" and said "availability [rates] could reach north of
17%," said Richard Persichetti, vice president of research,
marketing and consulting for real estate services firm Cassidy
Turley. "And that hasn't happened."
Even so, Sixth Avenue faces several challenges. The large
financial and media tenants that typically have populated the
corridor's large buildings are looking for smaller spaces and less
expensive rents, said M. Myers Mermel, chief executive officer of
Tenantwise Inc., a real estate services and advisory company. The
technology sector, a growth engine in the city, still only has a
handful of mature companies, he said.
"We have a lot of younger tech companies," Mr. Mermel said.
"They can't afford Midtown rents."
Meanwhile, building owners tout their sprawling floor sizes and
the proximity to transportation hubs such as Grand Central, Penn
Station and the Port Authority bus terminal.
There is a "limited amount of contiguous blocks [of space] above
250,000 and 300,000 square feet in Midtown, where you can actually
go visit and walk the product now," said Mr. Elder of RXR Realty,
which is about to embark on an overhaul of 75 Rockefeller Center.
He added, "There are a lot of big tenants looking for that kind of
space."
BBDO, an advertising agency that has been at 1285 Avenue of the
Americas since the 1980s, considered a move to TriBeCa or
Chelsea.
While it coveted a downtown aesthetic, the firm decided it liked
its building's large floor sizes and central location. So it
commissioned an update of its office by design firm HLW
International LLP.
"The chairman of AT&T has to come in here and say this is a
great, cool space, but so does the 27-year-old art director with
tattoos who comes to work on his bicycle," said David Lubars,
world-wide chief creative officer for BBDO.
HLW's designers removed the trappings in style 20 years ago--low
ceilings and a cubicle farm surrounded by offices along the
windows, said John Mack, senior partner at HLW. The firm opened up
the space using a benching-system of tables clad in reclaimed
wood.
Sixth Avenue also has lured restaurateurs from trendy
neighborhoods such as NoHo and the Meatpacking District.
Butter--its executive chef, Alex Guarnaschelli, is a regular on the
Food Network's "Iron Chef America"--opened its second location just
off Sixth Avenue on West 45th Street. The Metric, a company with
restaurants in the Meatpacking District, opened the Wayfarer at
West 57th Street and Sixth Avenue.
"New York itself is changing," said Lisle Richards, a partner at
the Metric.
Hotel and residential development on West 57th Street also has
helped change the area, he said.
"Downtown is becoming uptown, and uptown has a touch of downtown
these days."
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