Desiato: What would your father say about the Manhattan real estate market today?

Rudin: He was a true believer in New York City, even in the darkest moments. Today, people in their 20s or 30s can't remember what it was like to be so close to the edge. He was a shining light of belief in the fundamentals, not only of New York City, but of urban America. If you remember the '70s and '80s--and even into the '90s--when people were abandoning urban areas. He always believed in the power of our cities, and he would view today as confirmation of what he always believed in--although I think he'd be shaken a bit at $1,000-a-foot prices and $150-a-foot rents.

Desiato: What could the city do better?

Rudin: My father always preached about fundamentals--crime, safety, clean streets, infrastructure. The whole debate about congestion pricing is about that--about making sure this city continues to grow and that the infrastructure is there to support that growth. It's critical, whether it's the rail link for Lower Manhattan and getting the $2 billion of unused tax credits converted as a down payment for connecting Lower Manhattan to JFK and Long Island. We've been working on those types of things at ABNY. It's different than when my father was around. Part of his battle was getting people to help. Today, people want to help. There were no BIDs or such organizations when my father started ABNY. Today we coordinate with other associations to make sure we're of one voice and work with the city to help them.

Desiato: And infrastructure is the big issue?

Rudin: Infrastructure is key. Housing is also a key issue, as is the cost of construction, which is impacting the ability to produce affordable or even middle-class or high-end housing. Those are issues we're very concerned about.

Desiato: It's been said that if you want to do business in New York you'll do it regardless of price. Does that concern you?

Rudin: It's always a concern that we do have a pricing issue. We want to be competitive with New Jersey and Texas and California. But there are solutions, and you'll see areas that weren't thought of become more viable. Our building at 32 6th Ave. in Tribeca is a perfect example. It's an off-location, and two years ago we had 300,000 feet of vacant space. Today we're 100% leased. When we started to reposition the building after the telecom bubble, we attracted media companies from Sixth Avenue and 55th Street. One tenant couldn't afford the $60-a foot rent there--and it would probably be $100 a foot today. They looked at 30 locations and picked our building because of the infrastructure and price point.

You'll see that at Hudson Square--good product in an off-location and an opportunity for companies to stay in Manhattan. For the city to grow, you need different price points to match the needs of tenants on hand.

Desiato: Update us on some of your recent projects.

Rudin: The main project is a redevelopment in Greenwich Village. I can't go into the details, but St. Vincent's Hospital owns the main campus between 12th and 11th streets just east of Seventh Avenue. It's a conglomeration of eight buildings built over the past 100 years. That footprint and those buildings just don't work for the healthcare needs of a growing population on the West Side and Downtown. They realized that, to survive, they have to develop a new hospital.

They also own a building across the street, called the O2 Building. The plan--and it's a very long and complex process in terms of landmarks and city planning--is to tear down that building and build the first environmentally green hospital in the city. Once they've done that, we would buy their existing campus, which has a footprint of about 90,000 feet, and build a residential project on that site. We're just starting the approvals process. I would guess this is an eight- or nine-year project.

Desiato: Does a commitment to green equate to returns?

Rudin: There's no question about it. Having a green environment is important in terms of leasing, whether it's commercial or residential, and it will continue to mushroom as a business practice. It's critical, and it makes a difference in recruiting. So we have to meet that demand when a company comes to us. In terms of cost, the gap continues to narrow down as more contractors and companies introduce new products. I think it's really de minimis at the moment--3% to 5%, and over the next few years that will continue to narrow.

Desiato: What are tenants looking for today?

Rudin: They're looking for space that meets their particular needs for 24/7 access, full energy loads or local connectivity. Or they be looking just for a good work environment. We as owners have to provide that broad range, from 355 Lexington, which has a lot of not-for-profits, to 3 Times Square that has a global media company.

The city has to diversify in the same way. As the financial-services industry slows down a bit, there's talk that New York hasn't diversified. I disagree with that. This is a global marketplace for companies that want to grow, Lower Manhattan in particular. Ten years ago it was 60% financial services. Today it's something like 40% or 45%, with the rest being media, communications, healthcare and education. We have diversified our economic base. Do we have to do more? No question about it, and that's why you'll see incentives for Lower Manhattan for companies that haven't been in New York City. There are tools to attract other industries. And that's a very important point that the mayor and his economic-development team have focused on and will continue to focus on.