On a sunny morning last week, a few Forbes reporters donned hard hats and neon yellow vests to tour Hudson Yards, the massive 28-acre development being constructed in one of Manhattan’s last undeveloped areas, Midtown’s far western edge. It’s the brainchild of Related Company’s billionaire developer Stephen Ross, whose firm says it’s the largest private real estate project in the nation. Four years after breaking ground, the first building, 10 Hudson Yards, is set to open. Luxuryhandbag maker CoachCOH +0.02%, which purchased roughly a third of the building’s space as the anchor tenant, officially started moving employees in this morning.
“For years people have been thinking about how to re-imagine Manhattan’s West Side, thinking about what it would mean to build a brand new neighborhood in New York City. And here we are today, standing in the first building of what truly will be a new city within a city,” Ross said.
The 10 Hudson Yards building is 96% leased. Over the course of this year, six other tenants will move in, including L’Oreal USA, Boston Consulting Group , German software firm SAP, consultancy VaynerMedia, Alphabet’s (formerly Google) urban-technology subsidiary Sidewalk Labs and media-tech firm Intersection (which is partly owned by Sidewalk Labs).
In 2013 Ross told FORBES that Hudson Yards was the project he was concerned most about. “Because it’s not all about the money, really, it’s about transforming something and what you leave behind,” Ross said at the time. (For more on the history of how Hudson Yards got off the ground, read the full feature here). A lot has happened since. Related’s total real estate assets under management now top $30 billion in value, double the amount in 2012. Forbes’ estimate of Ross’ net worth has tripled from $4.5 billion when he first won the Hudson Yards bid in 2008 to an estimated $12 billion now. Plus the estimated total cost of construction for Hudson Yards has doubled to $25 billion. So far, $5 billion has been spent.
“This has been a tremendous undertaking that has required an unprecedented amount of collaboration and coordination. To have 10 million square feet of mixed-use development under construction at the same time is not an easy feat. But we knew it had to be done this way. It’s what was best for Hudson Yards and for New York City,” Ross recently told Forbes.
Hudson Yards is expected to add about $19 billion annually to New York City’s gross domestic product once the entire development is completed in 2025, according to Appleseed, a consulting firm that provides economic research to government and corporate clients. That’s 2.5% of the city’s GDP, but perhaps more notably, more than Iceland’s entire output last year. But Chief Economist for the Fiscal Policy Institute James Parrott, who had previously served as chief economist for the city’s economic development efforts, told Forbes that the Appleseed report “vastly overstates the economic impact” of Hudson Yards since it doesn’t factor in that many of the jobs eventually there will have to move from other parts of the city. “It is economic analysis malpractice, at best, to assign the economic and tax streams associated with such jobs to a new project.”
Hudson Yards has already benefited from city help through the years: The No. 7 subway extension to the site, completed last year, was paid for by a $3 billion city bond offering, which also included earmarks for other infrastructure upgrades in the area. In addition, in 2005, the city designed a tax incentive for the 41-acres rezoned on Manhattan’s Westside. Hudson Yards’ 28 acres fall into that neighborhood, and so far, about $650 million in tax breaks have been awarded across the area, a Related spokeswoman confirmed. Parrott called the city’s tax break policy for the development “by far the largest and most egregious tax giveaway in the city’s history,” in a 2005 paper. He says he still estimates that the Hudson Yards tax breaks will cost the city billions in tax revenue.
The neighborhood won’t just be filled with office buildings, although there will be three fully commercial properties (10, 30, and 55 Hudson Yards). Three other mixed-use buildings will have several floors of office space as well. 30 Hudson Yards already has commitments for the entire building ahead of its 2019 open date from private equity firm KKR, Wells Fargo Securities, TimeWarner, HBO and CNN. 55 Hudson Yards, slated to open in 2018, is currently 25% leased, with commitments from the likes of law firms Boies, Schiller & Flexner and Milbank, Tweed, Hadley & McCloy.
Ross said one of his biggest surprises has been that the office space at Hudson Yards is almost fully booked with years to go before completion. For a real estate development, that can mean the difference between struggling to continue financing construction or keeping the lights on. In comparison, the World Trade Center developments haven’t proved as popular. 4 World Trade, which opened in 2013, is 56% leased, while 3 World Trade, which is scheduled to open in 2018, is 28% committed.
“Downtown is the cheaper alternative. We’re the replacement for Midtown. If you’re a Midtown tenant, you can come over to Hudson Yards, pay Midtown rents but get state-of-the-art buildings in a more dynamic neighborhood,” says Jay Cross, president of Related Hudson Yards.
Aside from the roughly 8 million square feet of office space at Hudson Yards, Ross’s plan also includes a 1 million square-foot mall, similar to his TimeWarner Center development on Columbus Circle. It will have dozens of shops, anchored by New York City’s first Neiman Marcus, as well as restaurants by famed chefs Thomas Keller, José Andrés and Costas Spiliadis. The project will also feature 4,000 residences – a mix of owned units and rentals – a public school for 750 students, a public arts center and 14 acres of open space. Related estimates that come 2025, about 125,000 people will come through the neighborhood every day, including residents, workers and visitors.
Hudson Yards is also planning a 200-room hotel branded with the luxury fitness company Equinox, of which Ross and other Related executives are part owners. It’s slated to open in 2015, and is one of three Equinox hotels in the works. The others are planned for Los Angeles and Chicago.
“Cities have to reinvent themselves,” Cross says. “The fact that we really need new office space and we always need housing and now on the West side, we need retail, there are compelling demographic reasons that fed all of the components. And that’s why I think, ultimately, we’ll be very successful.”
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