By Liam La Guerre, Commercial Observer
Midtown needs to continue to modernize its 20th century building stock to continue to be competitive, RXR Realty’s Chief Executive Officer and Chairman Scott Rechler preached at Commercial Observer Midtown Means Business panel on April 20.
Mr. Rechler can speak with authority as his company recently completed a $130 million renovation of 75 Rockefeller Plaza, gutting the building and adding new windows and elevators, after acquiring a 99-year ground lease for the 33-story tower in 2013.
“There has been a transformation in the New York real estate market and in Midtown in particular in terms of 21st century tenants are now occupying our buildings,” Mr. Rechler said. “And when you have 20th century buildings like this building [1271 Avenue of the Americas] and 75 Rock, you need to actually adapt them to the needs of the 21 century tenants.”
Mr. Rechler made the comments in front a packed audience on the 33rd floor of the former Time & Life Building (which now goes by the 1271 Avenue of the Americas address). He headlined the event with CBRE’s tri-state CEO, Mary Ann Tighe; Winston Fisher, a partner at Fisher Brothers; and Derek Stewart, the head of real estate at online job search company Indeed. Jonathan Mechanic of Fried, Frank, Harris, Shriver & Jacobson moderated the event. Adam Spagnolo of SGA Architecture provided welcoming remarks, as did Dan Rashin of Rockefeller Group, the owner of 1271 Avenue of the Americas.
While the panelists spoke glowingly about the massive new structures coming to Hudson Yards on the West Side, where Tishman Speyer, Related Companies and Brookfield Property Partners are building shiny new office and residential properties, they also are looking forward to new space in traditional Midtown areas. They cheered the potential Midtown East rezoning, which will give developers the ability to build taller buildings in exchange for infrastructure improvements.
“I applaud the city,” Mr. Fisher said. “Hudson Yards—there are going to be new things happening there. [And] wait until you see what Midtown looks like with this upzoning and with all the capital investments.”
However, to help procure new technology, advertising, media and information services, or TAMI, tenants to Midtown from other areas in the city, there needs to be more flexible leasing options, such as smaller leases and the ability to expand easily. And this new type of tenant wants more boutique retailers and unique experiences in its neighborhood.
“What tech companies and TAMI companies are looking for is a community—the stuff outside the actual office building,” Mr. Stewart said. “If more owners will take less rent and take a chance on [more] boutique establishments, I really think it will pay off and drive people to the area.” (Think fewer Starbucks, more Blue Bottle.)
In addition to office tenants, more residences are starting to crop up in Midtown, a trend that could intensify, Ms. Tighe said. Since 2010, 2.7 million square feet of office space has been converted to residences in just Midtown alone.
“We have seen more residential [coming] to Midtown, because we learned our lesson in Downtown and Midtown South,” Ms. Tighe said. “What do people want? They want live-work-play.”
The RXR platform manages 69 commercial real estate properties and investments with an aggregate gross asset value of approximately $18.1 billion, comprising approximately 24.6 million square feet of commercial properties, inclusive of a multi-family residential portfolio of approximately 2,600 units under operation or development, and control of development rights for an additional approximately 3,600 multi-family and for sale units in the New York Metropolitan area. Gross asset value compiled by RXR Realty in accordance with company fair value measurement policy and is comprised of capital invested by RXR and its partners, as well as leverage.