In the late 1990s, the Durst Organization jump-started the revitalization of the Times Square area when it built a speculative office tower at 4 Times square and Broadway. After breaking ground, the developer needed only six months to fully lease the building, with Conde Nast as the lead tenant. Now, Durst's latest venture, the construction of the world-class Bank of America glass-and-steel tower at 1 Bryant Park and West 42nd Street, is helping transform the corridor's midsection. This part of the 42nd Street area is a hotbed of activity.
There's the upcoming sale of the 1 million-square-foot Verizon Building at 1095 Sixth Ave., the major refurbishing of old buildings, and the construction of several new buildings, some of which are expected to fetch staggeringly high rents, even by Manhattan standards. “In the last five years, you have seen major real estate families and institutions making commitments to an area that formerly no one would touch," says Harry Blair, managing director at Manhattan-based brokerage firm GVA Williams.
While vacancy rates for Class A commercial space have risen slightly around Grand Central Terminal, rents in the neighborhood are climbing. The increases can be tied to the extensive renovations in the area. Grubb & Ellis, for example, led a $50 million refurbishment of the 550,000-square-foot 1120 Sixth Ave., between West 43rd and West 44th streets, for which it is the leasing agent. The overhaul included a reskinning of the building and a compression of the garage to add an extra 30,000 square feet of office space. Asking rents are currently hovering around $60 a square foot.
Similarly, GVA Williams is repositioning the nearby National Association Building at 25 W. 43rd St., which was bought in 2000 by Chicago-based Transwestern Investment Co. In addition to a $3.5 million renovation that included upgrades to the lobby and office suites, GVA also gave the building a new address, 28 W. 44th St., to align it with the hotels and posh Ivy League clubs on that block. The 300,000-square-foot building is now about 90% occupied, says Mr. Blair, who is the leasing agent for the building.
Through the roof
More dramatic than the area's renovations is the new construction that will upgrade the Sixth Avenue axis. The 2.1 million-square-foot Bank of America tower, expected to be completed in 2008, will hit the market with rents of more than $100 a square foot, says developer Douglas Durst. One block east, New York developer Axel Stawski broke ground last March on 505 Fifth Ave., a 300,000-square-foot speculative building that will have about 25,000 square feet of retail space and 275,000 square feet of Class A office space when it is completed next fall. Asking rents are expected to be more than $70 per square foot.
Similarly, American Properties plans construction in a lot adjacent to Bush Tower, calling the new structure 140 W. 42nd St. Slated for completion in 2007, the building will cost $70 million and will contain 180,000 square feet of commercial Class A space. "The whole area is changing because of Bank of America and new construction," says Robert Von Ancken, executive managing director for Grubb & Ellis. "Owners have decided to upgrade from Class B to Class A buildings."