Manhattan’s garment district is undergoing a renaissance, with the recent sale and refurbishment of many office buildings and an influx of tenants from media, advertising, entertainment, technology and other, nonfashion industries.
This rebirth has been caused by an exodus of tenants from areas where rents have skyrocketed, including Park Avenue South, Midtown and Midtown South, said Paul J. Amrich, vice chairman of the New York tristate region for CBRE, a real estate services company.
According to CBRE, the average asking rent is $47.39 a square foot, compared with $59.03 in Park Avenue South, $69.82 in Midtown and $64 in Midtown South. CBRE also said office space availability is 11 percent today in the garment district, compared with 11.5 percent in Park Avenue South, 12.3 percent in Midtown and 10.1 percent in Midtown South.
Other attractions of the garment district — roughly the area bounded by West 35th and 42nd Streets and Seventh and Ninth Avenues — include its proximity to Penn Station, the Port Authority and Grand Central Terminal for commuters, the revitalization of Bryant Park and myriad new hotels, stores and restaurants.
Mitchell L. Konsker, vice chairman of Jones Lang LaSalle, said another selling point was the many buildings with loft-style spaces with high ceilings and concrete floors. That appeals to tenants who “don’t want to be in just a glass box,” said Jonathan Bowles, executive director of the Center for an Urban Future, a research group. “Some really want a building with character,” he said.
Although a city zoning law requires buildings on some side streets in the district to reserve space for clothing manufacturers under certain circumstances, it is generally not enforced, said Barbara Blair Randall, president of the Fashion Center Business Improvement District. Of the 750 new tenants in the district this year, fewer than 40 percent are in the fashion industry.
James G. Phillips, founder of TPG Architecture, a Manhattan-based firm with 215 employees, typifies the district’s new tenants.
TPG has occupied 34,000 square feet of sublet space at 360 Park Avenue South and 26th Street since 2004. Mr. Phillips said it initially paid $28 a square foot; it pays $48 today. If it were to stay in the building, its rent would be $55 a square foot next year. Early next year, it will move into 31 Penn Plaza, an 18-floor, 445,000-square-foot building bought by Savanna, a real estate investment firm, for $130 million in 2011. Savanna is spending $13 million to upgrade the facade, entrance, lobby, elevators and other infrastructure.
Christopher Schlank, managing partner of Savanna, said that when it bought the building, average rents were $33 a square foot; today they are about $43. He said Savanna had leased 205,000 square feet in the building since its acquisition; new tenants, beside TPG, include Regus, which offers temporary workplaces, and Real Estate Arts, a digital marketing and branding agency.
TPG’s rent will be similar to the average for the building, Mr. Phillips said. It is receiving other incentives, including cash to rebuild its space and a significant amount of free rent.
The Zar Group, which owns real estate in Brooklyn, Long Island and Miami, said it was spending close to $25 million on capital improvements at 1450 Broadway, a 42-floor, 400,000-square-foot building on the southeast corner of 41st Street and Broadway that it bought for $204 million in 2011.
Improvements under way include a revamped, Italian marble and glass lobby and entrance, by Moed de Armas and Shannon Architects, and new windows, bathrooms and elevator corridors on office floors.
Recent new tenants that are not in the fashion industry include Macro Risk Advisors, a financial company; First National Bank of New York and EVA Airways; and the investment bank Messier Maris & Associates, which will move in next January. According to Mr. Zar, average rents today range from the low $50s per square foot to close to $70, depending on location in the building; he said that when he purchased it, the average rent was in the low $40s.
Other buildings in the district being upgraded include 1375 Broadway, also owned by Savanna, which has spent $8 million to restore its facade and renovate its lobby. Rents here have climbed to $45 to $47 a square foot from $22 a square foot in 2010.
Normandy Real Estate Partners has spent some $5 million on improvements to the lobby and elevator cabs of 1370 Broadway; Paul Teti, a senior vice president of Normandy, said rents here had increased 10 percent to 15 percent in the last 18 months.
Managed by Callahan Capital Partners and jointly owned by Swig and Ivanhoe Cambridge, 1411 Broadway, a 40-story, 1.2-million-square-foot building, will have a resurfaced exterior, new plaza and refurbished lobby. Tim Callahan, chief executive of Callahan Capital Partners, said rents now being charged are at the “high end” of the $70 a square foot range, up from the $50s in 2009.
And Princeton International Properties, which paid slightly more than $100 million for 104 West 40th Street, the landmark-status, Modernist, former Springs Mills Building by Harrison & Abramovitz, last December, has few vacancies, compared with a 40 percent vacancy rate last year. David Tawfik, chief executive of Princeton, said the “vast majority” of new tenants — which include Regus, Vox Media and Gotham, a unit of IPG — are not in the fashion industry.” He said rents had gone as high as the low $60s from rates in the high $40s.
Mr. Amrich said the garment center “still has a long way to go” in additional redevelopment.
Improvements in the streets and parks nearby include the creation four years ago of Broadway Boulevard, which extends from Greeley Square to Times Square and features pedestrian plazas, tables and chairs.
A project called Boulevard 41, a tree-lined boulevard on 41st Street from Broadway to Sixth Avenue, with plantings, seating, tables and programming, is under consideration and could open in spring 2014.
Such projects would make the area more attractive to tenants and their employees, as will the $400 million remodeling under way at Macy’s Herald Square.