Fashion Center dresses for office use

Real Estate Weekly, March 24, 1999 by Lois Weiss

Now that Times Square has turned into a pricey, corporate office location, and rents in Grand Central and the Plaza District are climbing into the $40s, $50s, $60s and higher range, both tenants and property buyers are turning southwest.

What they are discovering are buildings near the great transportation offered by Penn Station and the Port Authority Bus Terminal; subway stops along Sixth, Seventh and Eighth avenues; and fairly decent B to C buildings with good bones and room for improvement.

What they are also finding are most rents well under $20, which brokers say can only go up. And that is leading to many new investments in building systems, lobbies and streetscapes, as well as new purchases of the buildings themselves.

"That's an area screaming for development," said broker David Brimlow, whose firm, Brimlow Realty Corp., also manages commercial and residential properties. "But don't come in there and build Class A. Convert to nice B."

With rents generally anywhere from $15 to $20 a foot, a decent job, he believes, should fetch anywhere up to $30 a foot.

"There are beautiful lobbies - they need 24-hour service and lobby upgrades - but the spaces are fabulous and can easily be converted to nice offices," said Brimlow.

Led by Vornado's numerous investments around Penn Station through Mendik Realty's portfolio of Two and Eleven Penn Plaza and the leasehold at 330 West 34th Street; the Riese Organization's 160 and 162 West 34th Street, and 494 Seventh Avenue; and the real estate investment trust's dramatic purchases of the leasehold at One Penn and the Hotel Pennsylvania, other prominent buyers are trying to capitalize on the added value soon to come.

The area south of 42nd Street and generally west from Broadway is variously known as the Garment Center, the Fashion District, Penn Station, or lately, Times Square South. The actual Fashion Center BID area is generally from 35th Street north to 41st and from Eighth Avenue to Broadway.

It's the dynamic turnaround of the Deuce and the numerous construction cranes that has, of course, led to the brokers becoming only too happy to use the cache overflowing from the Crossroads of the World.

When the prestigious law firm Skadden Arps Slate Meagher & Flora needed space for file and back office uses, but didn't want to pay the more than $55 a foot to get more room at its upgoing new 4 Times Square home, the counselors didn't have to look far to find the space they needed at 1460 Broadway.

This traditional textile building was a mere one-block further south at 41st Street, and had been purchased as part of a portfolio by TrizecHahn, a Canadian-based, New York Stock Exchange-listed real estate group that is turning the building from fabric to office facility.

In order for the law firm to lease 188,000 square feet in a 15-year deal, TrizecHahn has had to work with 20 material traders that needed to find new digs.

Further lifting the area into the cache of office pioneer status was the move of Bates Advertising from the Chrysler Building into 200,000 square feet in the base of the George Comfort property at 498 Seventh Avenue.

In January, CoStar reported Bates took an additional approximately 24,000 square feet on a higher floor.

"They still have Victoria's Secret's offices, and while they are not precluding fashion tenants, they are not excluding them," said Sandy Fagin, a broker with Murray Hill Properties who conducts a real estate radio show from a nearby Seventh Avenue building and keeps his eye on area opportunities.

The fashion tenants in the Comfort building are, for the most part, being bumped upstairs, relayed Jeffrey Mann, who operates his family's 69-year-old Garment Center brokerage firm, the Mann Group, and also publishes building-by-building showroom guides and The Fashion Mannuscript, a glossy which details the people, restaurants and charity events supported by that industry.

"Everyone is looking to the area," Mann said. "You can still make your deal in the mid 20's, and there aren't many places left in the city you can get that."

This is a trend that the BID is tracking and noticing, said Barbara Randall, executive director of the Fashion Center BID. "We started to feel the edges of it 18 months ago, but in the last six months, there has been a sea change in the way people are seeing the district."

The influx of office tenants and the opening of the new Marriott Courtyard have acted as a catalyst for other turnabouts, Mann said. When he worked in his 1440 Broadway offices over a March weekend and went out for lunch, the relocated restaurant Mustang Jack's, now at 147 West 40th Street, was packed, and so were the streets.

"You never saw this area bustling like that on a Saturday or Sunday," said Mann, impressed with the new street life.

He also pointed to the Crunch gym at 1385 Broadway, which is expected to open next month. "They never had a gym here," Mann emphasized. "They wouldn't have a gym opening at 5:30 a.m. if it weren't safe."

Advertising firms previously led the march into Park Avenue South, the Flatiron District and south Chelsea. These were areas that earlier coddled the graphic artists, photographers, musicians and small presses that serviced the very same ad firms, as well as engineers and architects.