New york city fashion show

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.

Many of these are firms that, by their very service nature, don't usually have client visitors, but instead venture out to meet the clients at their own Class A offices.

The edges of the Garment Center have already attracted building architects such as Der Scutt, who long has had a bright loft space on West 28th Street; and Costas Kondylis, who will move to a space on 27th Street this summer.

The former McGraw Hill Building at 475 Tenth Avenue at 36th Street, owned by the Adler Group, is loaded with well-known architects such as Richard Meier, Gwathamy Siegel, and Buttrick White & Burgis. Last summer, Ian Schrager Hotels moved into one of the 17,500 square-foot floors, where the asking rent on a remaining floor is about $18 a foot.

"It's one of the few places you can get upper teens per square foot, and there are some tenants willing to go to untested areas in order to keep their rents at a reasonable price," said Fagin. Earlier 90's trend spots like Hudson Square, he noted, have rents now approaching $35 a foot.

Typical of the new tenants is Quinn & Co., a public relations firm servicing hotel and real estate clients that just moved to a building on West 35th Street from the Flatiron District. Its long-term lease became due and the rent would have to jumped from $11 to $22, said Vice President David Platter.

By moving to the mid-block loft building, they were able split the difference and rent approximately 2,200 square feet for about $17 a foot. The 100,000 square-foot building is one of several similar properties on that block with availabilities and rents ranging from $10.50 to $20 a foot, and is currently listed in CoStar as being close to 100 percent full.

"We feel like pioneers," said Platter. "We moved into the Flatiron District when it was a mess, and now its desirable, and now this is the up and coming area. You get cheap food and you're close to Macy's, and we got to build out a beautiful new space. And now we have room for luxuries like our 'Dream Room.' It's a place for dreaming and screaming, and we use it to brainstorm and strategize, or just to brew a cup of tea. We couldn't have afforded that if we stayed in the other neighborhood."

If there were space at the 240,000 square-foot 1001 Sixth Avenue at 37th Street, owned by a Helmsley-Spear group led by Alvin Schwartz, a tenant might only pay $18-$20 rents, said Mann. "It's perfect for an ad agency," he added, "and its close to Penn Station, Grand Central or the Bus Terminal."

When tenants at 310 Madison Avenue at the corner of 42nd Street got their dispossess notices from Harry Macklowe, they were taken aback. Rather than finding rents similar to what they were paying in the high-teens and low $20's, they found nearby spaces in the Grand Central Station area bottoming at $30 a foot.

"They got sticker shock," said Brimlow, a broker who has worked and is still working to relocate a number of tenants.

It's that city center sticker shock, however, that is driving new investment and new tenants to Fashion Land.

Available Land

While areas closer to the Javits Center and Lincoln Tunnel are desolate and more industrial, brokers are beginning to list long-dormant development sites.

Noel Berk and Barbara Stone of Cushman & Wakefield have a 175,000 square-foot buildable development site listed on the east side of Tenth Avenue between 37th and 38th streets.

The Carlton Group is working on three sites between Tenth and Eleventh avenues, also near the Javits Center, that are owned by Arthur Imperatore and are already preapproved for hotel, residential, community and/or parking uses, depending on the site.