America‘s most famous city owns the distinction of ranking first in many categories. Still, New York City found room to add one more title to its mantle: the No. 1 metropolitan area in the U.S. for corporate real estate projects in 2009.
By landing 215 corporate facility deals that meet the criteria of the Conway New Plant Database, the Big Apple ended a decade of dominance by three large metros — Chicago, Dallas-Fort Worth and Houston. From 2000 through 2008, the No. 1 metro ranking had gone to one of these three central U.S. cities.
All recorded a strong showing again in 2009 as each placed in the top five. Chicago ranked second, with 177 deals, followed by Dallas-Fort Worth with 135, Detroit with 133 and Houston with 123.
For New York City, the breakthrough win signaled a remarkable turnaround for a market that had seen millions of square feet of corporate-occupied space go vacant following the collapse of Lehman Brothers in September of 2008.
“Here in the trenches, we have been feeling a lot of pain,” says Ann Kayman, CEO of the New York Grant Company, a consulting firm that helps businesses secure economic incentives and grants throughout the city. “Major titans fell. Small players got squeezed out. Financing dried up. But then a buyer’s market materialized, the likes of which we had not seen in 25 years.”
What followed, beginning around mid-2009, was a flurry of corporate real estate deals throughout the New York City MSA, a sprawling metropolis that stretches into New Jersey and Connecticut.
Moshe Sukenik, executive vice president and principal of Newmark Knight Frank’s New York City office, represented tenants in three of Manhattan‘s largest office leases of the year: the National Basketball Association, the law firm of Orrick Herrington & Sutcliffe LLP, and the law firm of Paul Weiss Rifkind Wharton & Garrison.
After looking for two years, the NBA renewed its lease at 645 Fifth Avenue, a place the league has called home for the past 33 years. The NBA signed a 10-year lease for 153,000 sq. ft. (14,214 sq. m.) at the building owned by Olympic Tower Associates.
The Orrick lease marked one of the year’s more high-profile relocations. The firm moved from 666 Fifth Avenue to the Blackrock Building at 51 West 52nd Street, a building that houses its owner, CBS Broadcasting Inc. Orrick signed a 213,000-sq.-ft. (19,788-sq.-m.), 15-year deal that includes an option to lease additional floors.
Deal Triggers Positive Velocity
“The Orrick lease in late July was one of the very positive triggers in Manhattan,” says Sukenik, a tenant rep broker who specializes in developing corporate real estate strategies. “Orrick had a lease expiration coming up, and we advised them to take it slow, given the movement in the market.”
Sukenik says site selection and lease negotiations took almost three years. “The actual transaction was a February-through-July exercise in 2009,” he says. “The new space has capacity for 270 lawyers.”
Sukenik also represented Paul Weiss in its renewal and expansion at 1285 Sixth Avenue in November. The 550,000-sq.-ft. (51,095-sq.-m.) deal at the building owned by J.P. Morgan Securities was one of the largest office transactions in New York last year.
“Paul Weiss and the NBA are examples of tenants that checked out the market but were happy in their work environment,” Sukenik adds, noting, “2009 was an extremely busy year. The right attitude during a down market is that you are in the middle of opportunity. If you view the world that way, it is a much more conducive attitude to help your clients.”
Matt Van Buren, executive managing director for CB Richard Ellis in Manhattan, says he noticed a dramatic turnaround in the New York office market around May. “Leasing velocity began to rebound in the market, and we have since seen nine months of in-range, normal velocity,” he says. “Where did it come from? Two places — pent-up demand from the period when no deals were being done, and the volume of lease expirations in the second half of 2009.”
Good deals remain for corporate clients, he notes. “Effective rents are down 40 percent in Manhattan. Tenants are looking at those kinds of opportunities, and they are looking at doing long-term deals,” he says. “Financial services companies, law firms, and media, entertainment and advertising companies account for two-thirds of all leasing in Manhattan.”
Among media companies, The New York Times made headlines of its own by moving into a new headquarters in Midtown. The newspaper company invested $24 million into improvements at the 750,000-sq.-ft. (69,675-sq.-m.) office building.
Showtime, Edison Learning and Horizon Media all consummated big deals in Manhattan as well. Horizon relocated to 115,000 sq. ft. (10,684 sq. m.) at One Hudson Square. The 15-year lease at the Trinity Real Estate property represented the second large media tenant signed at the building, joining Heartbeat Digital.
“This new headquarters will bring all of our New York staff together under one roof in the fall of 2010 in an innovative and collaborative environment that will increase productivity and spark creative energy,” said Bill Koenigsberg, CEO, president and founder of Horizon.
Even the brokerage firms are getting in on the act in New York. CB Richard Ellis announced Jan. 6 that it had renewed its New York Tri-State Region headquarters office lease at 200 Park Avenue in the Met Life Building. The 15-year lease begins in June 2011 and covers 125,771 sq. ft. (11,684 sq. m.). The deal includes a redesign of space as the firm relocates to new floors in the building, which has been CB’s home for 23 years.
Pockets of Activity Proliferate
Outside Manhattan, big deals throughout the New York MSA included life-science R&D space, data centers and logistics facilities. The Bronx, Brooklyn, Long Island and several New Jersey cities contributed heavily to the metro area’s top ranking in 2009.
Regeneron Pharmaceuticals announced a $40-million, 300-job facility investment in Greenburgh in Westchester County, while Sleepy’s Mattresses ($70 million, 150 jobs) Maplewood Beverage Packers ($67 million, 60 jobs) and Dendreon Corp. ($50-million pharmaceutical factory) announced expansions in New Jersey.
Kayman notes that New York offers an array of programs that encourage movement of industrial operations to the boroughs. “Companies are awarded up to $3,000 for each employee for up to 12 years to make that move,” she says. “That is attractive to any business. We have a very business-minded mayor who thinks about taxes as a strategy for economic development.”
As a result, “pockets of tremendous development are happening all around New York,” adds Kayman, citing such hot spots as Atlantic Yards in Brooklyn, Hudson Yards, and the Columbia University area in Upper Manhattan.
It’s all about timing, notes Sukenik. “Tough times make for interesting opportunities,” he says. “That is the case for any industry, and that is certainly the case for the real estate market in New York City.”
