When Hudson Yards opened in 2019 as the largest private development in U.S. history, it sought to transform the Far West Side of Manhattan with a sleek distribution of ultraviolet apartments, office towers for power companies like Facebook, and a mall with prestigious international brands and restaurants by celebrities. chefs like José Andrés.
All this surrounded a copper-colored sculpture that would be the Eiffel Tower for Paris in New York.
But the pandemic plagued the New York real estate market and its initial $ 25 billion development, raising important questions about the future of Hudson Yards.
Hundreds of apartments remain unsold, and the mall is barren of customers. Its anchor tenant, Neiman Marcus, filed for bankruptcy and closed permanently, and at least four other stores, as well as several restaurants, also did not do business anymore.
The center of the development, the 150-foot-long scalable structure known as the Vessel, was closed to visitors in January after a third suicide in less than a year. The office buildings, of which the workers maintain many shops and restaurants, have been largely empty since last spring.
Even more dangerously, the promised second phase of Hudson Yards – eight additional buildings, including a school, more luxurious apartments and office space – appears indefinitely while the developer, the Related Enterprises, seeks federal funding for an almost 10-acre platform on which it will be built.
Relatives, who said the entire project will be completed in 2024, no longer offer an estimated completion date.
The misery of the project is in many ways a microcosm of the greater challenges the city faces as it seeks to recover.
Related says he reckons wealthy buyers are filling their apartments and customers who are deep down are packing the mall to make Hudson Yards financially viable.
But that was before the coronavirus arrived in New York.
With the pandemic forcing white-collar workers to stay at home – and keep foreign buyers and tourists away – it’s not clear when, or the question, will fuel the huge supply of luxury airlines and blue-chip office space that the city’s skyline does not displace.
“The challenges Hudson Yards face are not unique,” said Danny Ismail, an analyst and chief executive officer of Green Street Advisors. ‘The commercial real estate in New York was influenced by Covid-19. However, I would argue that post-pandemic, Hudson Yards and the surrounding area will therefore be one of the better office markets in New York. ”
The creation of Hudson Yards took nearly 30 years to plan for the last large, undeveloped package in Manhattan, industrial land between Pennsylvania Station and the Hudson River.
It is the largest public-private enterprise in New York and the largest development of the city since Rockefeller Center in the 1930s, aided by about $ 6 billion in tax cuts and other government assistance, including the expansion of the subway to the West Side. Even with the subway expansion, Hudson Yards is still relatively isolated from the rest of Manhattan, off the beaten path of the busiest roads for tourists, buyers and workers.
Relatives admit that he is facing the same financial problems as the rest of the city, but said tenants are still moving into the office’s office buildings and that Hudson Yards will eventually bounce back.
Four office buildings at Hudson Yards – including 50 Hudson Yards under construction – are being leased 93 percent, a Related spokesman said, although it is unclear how many of those took place last year. Facebook signed a lease for approximately 1.5 million square feet at the end of 2019.
“Our strong office rent, even during the pandemic, is why we are well positioned to lead the return of New York from Covid and why the adjacent neighborhoods and the entire West Side will recover more quickly,” said spokesman Jon Weinstein. said.
Yet the problems Hudson Yards faced caused Related to reconsider its plans.
Led by billionaire founder Stephen M. Ross, the company sought to build Hudson Yards in two phases. The first phase, which opened in 2019, has four office towers, two residential buildings, a hotel and the shopping center.
The second part was supposed to include 3,000 residences across eight buildings closer to the Hudson River, as well as a 750-seat public school and hundreds of cheap rental units. At least 265 apartments are ‘permanently affordable’ under a 2009 agreement between City Hall and Related.
In total, Hudson Yards is expected to span 28 acres of existing railroads and cover 18 million square feet of space, about twice the size of downtown Phoenix.
The developer has considered a number of new options, including even a casino, although the idea according to Mr. Weinstein is no longer in front and in the middle.
Related can not construct the second half before building a deck over the railway yard. The company, along with Amtrak, was in talks with the federal Department of Transportation about a low-interest loan to finance the platform and retain the right for a new railroad tunnel under the Hudson that Amtrak plans to build.
Related sought more than $ 2 billion, according to two officials who were informed about the proposal and who were not allowed to discuss it in public.
“The residential will have to repair, or they turn it on and look at another product mix there,” said Robert Alexander, chairman of the three-part region for the brokerage firm CBRE, which markets space at Hudson Yards. “For me, it’s an important development site and there are many, many, very important development sites in New York.”
Related is also experienced by the pressure of its investors to provide a more complete accounting of the project’s finances. A group of 35 investors from China – some of the roughly 2,400 that contributed $ 1.2 billion to Hudson Yards – sued the company last year, accusing it of refusing to open its books or say when it did can repay their investments.
An arbitrator in the case recently denied the claims of the investors and ruled that Related should not disclose detailed financial information.
The company’s lawyers said that Hudson Yards had ‘significant headwinds due to Covid-19’, and that due to the economic downturn and the constraints of the investment, he could not invest in at least one property there, 35 Hudson Yards do not recover. a mixed-use tower with a hotel, according to documentation obtained by The New York Times.
Another group of Chinese investors, whose contributions of $ 500,000 per person are said to be part of a U.S. visa program that could give them a path to citizenship, are also considering filing a similar lawsuit against Related. who was not authorized to speak in public.
Relatives made it clear before the outbreak that he intended to earn most of his money at Hudson Yards through his apartments and shopping center, as Mr. Ross said he rented office space at cost without making a profit.
The pandemic has brought the difficult road forward. In 2020, 30 residential units were sold at Hudson Yards, compared to 157 the previous year, according to an analysis by valuation firm Miller Samuel for The Times.
So far this year, several homes are under contract at Hudson Yards, according to Related, a possible sign that the market may stabilize.
Yet Manhattan currently has a record number of apartments for sale, especially luxury units like those at Hudson Yards, and it could take years before sales really bounce back, according to Nancy Wu, an economist at StreetEasy.
“Hudson Yards was built for a buyer who is no longer there and perhaps in part a tenant who is no longer there, and it was someone who wanted to live in Manhattan but did not want to live in the city on its own,” has Richard Florida, a professor at the University of Toronto’s Rotman School of Management and School of Cities, referring to the development’s homogeneity and somewhat isolated location.
The retail photo is also dark. The large space occupied by the failed Neiman Marcus store will no longer be taken up by another retailer. Instead, Related will turn it into more offices.
Meanwhile, the company intervened in the bankruptcy case of Neiman Marcus, claiming that the department store owed $ 16 million for breach of its lease and an additional $ 129,000 for removing its movements in the mall, including a giant sign that hung in a five-story building. glass atrium.
While the mall closed with lock-in orders from mid-March to early September, shoppers are still largely absent.
Related struggled with his other beleagured retail tenants and even threatened with $ 1,500 fines a day for not staying open after the mall reopened.
Several stores, including Forty Five Ten, a luxury clothing store from Dallas that opened next to Neiman Marcus, have closed permanently. The store opened with 79 stores and now has 89, Related said.
Related said the mall has added at least 11 stores since September, including Herman Miller, Levi’s and Sunglass Hut.
In the weeks before Christmas, there was a shortage of tourists and office workers, and some shops were still closed, while others like Rolex were only open by appointment. The employees of the shopping center have far more numbers than buyers in the cave building, where the place where the busiest at Blue Bottle Coffee appears to be.
The traffic days at the Hudson Yards subway station, part of the number 7 expansion the city paid for to make the development possible, dropped to an average of 6,500 riders in December, a sharp drop from the 20,000 daily average in 2019 , according to the Metropolitan Transportation Authority, which manages the subway.
The lack of shopping at the mall has reduced Related’s revenue as the company structures a number of retail leases so that stores pay rent based on a percentage of their monthly sales. In addition, a number of leases were specifically linked to the fate of Neiman Marcus – if closed, smaller stores would not have to pay rent or could break their leases without penalty.
Relatives do not want to comment on its terms with tenants, including whether hesitations are not paid.
Mr. Weinstein, the company’s spokesman, said retail “will always be an important element of our new neighborhood.”
Despite the uncertainty, Hudson Yards has already helped transform the neighborhood into an important business district and part of a portion of Manhattan along the West Side that is becoming an important technological corridor.
The development has attracted a who’s who from companies including HBO, CNN, L’Oréal USA, BlackRock and Tapestry, the parent company of Coach, Kate Spade New York and Stuart Weitzman.
“I think New York will be good, and Hudson Yards will be good,” he said. Florida said. “Will Hudson Yards be the same as envisaged? This is the open question. ”