While wading through a sea of naked, yet creatively painted, panhandling women might be great fun for the millions of tourists that flock to New York's Times Square each year, as it turns out it's not ideal for conservative accountants just trying to get to work. And, as Bloomberg points today, a whole host of marquee office tenants that moved into Times Square after Mayor Rudy Giuliani cleaned up its past era of "porn and squalor" are now deciding they've had enough of the neighborhood's new era of "porn and squalor."
The most recent is Ernst & Young LLP. Its departure from 5 Times Square, announced this month, may leave the tower’s million or so square feet of office space empty. The neighborhood’s effective office rents -- the rents that tenants actually pay, after concessions -- have fallen by 1 percent annually for two years, according to CoStar Group Inc., a research firm that tracks office leasing.
One problem is a rise in tourism and a proliferation of panhandlers. Some are dressed as Elmo and Spider-Man; others, like the “desnudas,” are hardly dressed at all.
“It’s not ideal to wind through costumed characters on your way to work,” said Lauren Baker, New York City market analyst for CoStar. “There’s so much noise and commotion.” The neighborhood “obviously isn’t ideal for professional tenants,” she said.
Of course, as a study released last month by the New York Building Congress noted, a massive supply glut of new office space flooding the city has certainly made it easier for large firms like E&Y to find great deals.
The non-residential sector, which was responsible for 32 percent of all New York City construction spending in the decade between 2006 and 2015, accounted for 41 percent of all spending in 2016. The only other time over the past two decades that non-residential accounted for such a large share was 2010, when the rebuilding of the World Trade Center was at its peak and billions of additional dollars were being invested in the new Barclays Center and the renovation of Madison Square Garden.
At the moment, the primary driver of non-residential spending continues to be office construction, which is at its highest levels in three decades. The Building Congress estimates that 15 million square feet of office space will be completed in Manhattan alone during the three-year forecast period, with an additional 2 million square feet of office space anticipated for completion in the boroughs of Brooklyn and Queens.
In fact, E&Y, along with another prominent Times Square tenant Skadden Arps Slate Meagher & Flom LLP, will be moving to a brand new office space currently being built by Brookfield on 33rd and 9th, far away from Times Square's scantily-clad panhandlers.
All over Midtown, landlords have had to offer more in improvement allowances and concessions to compete, as tenants decamp for the Hudson Yards area on Manhattan’s West Side.
“There’s going to be short-term pain, and we’re already seeing it,” Baker said. “Grand Central and the Plaza District and Times Square are all kind of in the same boat.”
EY is taking about 600,000 square feet at a 67-story, 2.1 million-square-foot skyscraper that Brookfield Property Partners LP is building at its Manhattan West project, at 9th Avenue and West 33rd Street. One of the accounting and consulting firm’s co-tenants will be the law firm Skadden Arps Slate Meagher & Flom LLP, which is moving from the Durst Organization Inc.’s 4 Times Square into the Brookfield tower. Another is the National Hockey League, moving from 1185 Avenue of the Americas, a building very close to Times Square owned by SL Green Realty Corp., the largest New York office landlord. The deal was sweetened by an ice rink to be built in the plaza in front of the tower.
Of course, since we're well aware that you only 'read' this article to get a "closer look" at New York's growing "desnuda" industry, here are a couple of the entrepreneurs who have undoubtedly contributed to the recent spike in vacancies in New York's once-prime real estate.