This new construction wasn't forecast to have a major impact on increasing supply even before the destruction of the World Trade Center towers. Of the eight new buildings now under construction in Midtown, 87% of the 7.6 million sf currently being built is already pre-leased according to Grubb & Ellis. Preliminary site work now underway at three other Midtown projects will one day produce another 3.7 million feet, but 70% of that space is already spoken for, leaving only about one million sf of new space from those three projects available to meet demand.
"A huge part of the space that is under construction is already committed," says Ray O'Keefe, executive managing director and regional managing director of Grubb & Ellis. "There are only three million to four million sf available. While some may view the building that is underway as speculative, it's not, because most often there are tenants committed."
Four of the ongoing construction projects, totaling 4.2 million sf, are already fully leased. They are 383 Madison Ave., being developed by Sterling/Hines/Fred Wilpon; One Rockefeller Plaza West, developed by the Rockefeller Group/Tishman; 5 Times Square, by Boston Properties; and 1745 Broadway, Park Imperial, developed by Boston Properties.
The four other properties now being built will deliver another 3.4 million sf to market, but these buildings as of now will only generate just under one million sf in new available space. Tenants are committed already to the remaining 2.4 million sf. Those four projects are: Columbus Circle; 222 E. 41st St.; 160 W. 34th St.; and 731 Lexington Ave.
Grubb & Ellis lists three other projects as in the pipeline, ultimately producing 3.7 million sf of space. These three projects--Times Square Tower, Eighth Avenue between 40th and 41st streets, and 300 Madison Ave.--will add only 1.1 million feet of available space. Arthur Anderson, the New York Times and CIBC have already committed to the remaining 2.6 million sf.
Proposed projects without committed tenants, none of which has yet broken ground, will one day produce 4.4 million sf of available space. These projects are Battery Park City, site 5B; Cyber Center at 57th St; 20 Times Square/Port Authority Bus Terminal; and the southeast corner of 42nd St at Eighth Ave.
Rebuilding Downtown is important both for the city's psyche and for the vibrancy of the Financial District, which generates about 25% of the salaries paid in Manhattan, according to O'Keefe. Exactly how much space is rebuilt on the former Trade Center is dependent on many unforeseeable factors, including future market conditions and who the mayor and governor are when it comes time to talk.
One project that would contribute new space to Downtown is already funded, but its future is now less than certain although all parties are proceeding ahead. Special legislation signed by Gov. Pataki approved $950 million in bonds to acquire property and build what was thought to be a new home for the New York Stock Exchange across the street from its current Wall Street location.
The proposed project would include a 50-story tower above the new Exchange facilities offering nearly one million sf of new space available for other tenants.
While New York City officials are moving ahead with financing and property acquisition activities, the NYSE is considering whether or not to proceed with the original agreement. The NYSE faces financial penalties should it decide to cancel the agreement, according to a government official familiar with the letter of intent. A call for comment to the NYSE was not returned.
The proposed Battery Park City project being developed by Edward Minskoff and the New York City would add one million sf to the Downtown market. Construction is scheduled to begin in April 2002.
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