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Hudson Yards Redevelopment
Economic Overview andDemand Forecast
Presented by:
Economics Research Associates and
Cushman & Wakefield
Spring 2003
A D V I S O R Y G R O U P2
Objective
To create a strategy to unlock the value of the Hudson Yards and help secure New York’s economic future
To create a vibrant new mixed-usecommercial and residential district
To create a realistic plan to fund the infrastructure improvements that will spur private investment in the area
A D V I S O R Y G R O U P1
Madison Sq GardenMTA Yards
Javits
24th Street
7th
Ave
10th
Ave
35th St
42nd Street
28th Street
8th
Ave
Hudson Yards Today
PA Terminal
A D V I S O R Y G R O U P4
The Challenge and Opportunity
Midtown and Downtown are steadily losing office space market share
Unless we take action now to expand available land for office development, Manhattan’s competitiveness may continue to erode
Hudson Yards is the largest area proximate to Midtown that can accommodate the commercial development necessary to capture New York’s share of projected regional growth
“Without taking action to create more space, New York City will miss out on hundreds of thousands of new jobs and increased economic activity in the next 20 years.”
-Group of 35, Preparing for the Future, 2001
A D V I S O R Y G R O U P5
Assets. . . . . .and Challenges
Proximity to Midtown
Access to the waterfront
Major public facilities
Developable land
Ability to connect to existingtransportationinfrastructure
Outdated zoning
Lack of transit access
Declining employment and tax assessments
Lack of public open space
Dominated by surface car, truck and bus parking
Javits Convention Center is not realizing its full potential
A D V I S O R Y G R O U P6
Demand Forecasts
Office
Residential
Hotel
Retail
A D V I S O R Y G R O U P7
Office Development
Expansion of prime Midtown Office core
Necessary to meet projected office demand
Highest incremental property value
A D V I S O R Y G R O U P8
Midtown Office Market
Comprises 294.5 million square feet, or 44% of NY region
Combined with Downtown, totals 387 msf, or 59% of NY region’s office inventory
Premier and largest office market in the nation
Manhattan’s primary location for Services and FIRE sector employment
Together with Downtown, Midtown is the NY region’s Economic Engine
Losing share of occupied office space within NY region
A D V I S O R Y G R O U P9
New York Region Occupied Office Space by MarketHistoric 1986 – 2001
Source: Cushman & Wakefield Analytics
0
100
200
300
400
500
600
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01
Mill
ion
s o
f sq
uar
e fe
et
Midtown Downtown New Jersey Long Island Fairfield/ Westchester
45.5%
22.7%
18.1%
23.9%
16.9%
45.1%
3.7%10.0% 4.3%
10.0%
A D V I S O R Y G R O U P10
New York Region Average Annual Net Absorption by MarketHistoric 1987 – 2000*
Source: Cushman & Wakefield Analytics
0.0 1.0 2.0 3.0 4.0 5.0
Fairfield/Westchester
Long Island
New Jersey
Manhattan
Net Absorption (millions of square feet)
Midtown Downtown
3.2 0.8
2.5
0.4
0.7
* Only through 2000 due to events of 9/11/2001 which adversely impacted both total inventory and occupied space.
A D V I S O R Y G R O U P11
New York RegionNet Absorption (1987 – 2000) versus Occupied Space 2000*
Source: Cushman & Wakefield Analytics
* Only through 2000 due to events of 9/11/2001 which adversely impacted both total inventory and occupied space.
23.9%
45.1%
32.5%
41.8%
0% 10% 20% 30% 40% 50%
Long Island
Frfld/Wstchster
New Jersey
Downtown
Midtown
Occupied Space 2000 Net Absorption 1987 - 2000
A D V I S O R Y G R O U P12
New York RegionNet Absorption (1987 – 2000*) versus Projected Net Absorption (2005 – 2025)
Source: Cushman & Wakefield Analytics
* Only through 2000 due to events of 9/11/2001 which adversely impacted both total inventory and occupied space.
35.2%
40.7%
32.5%
41.8%
0% 10% 20% 30% 40% 50%
Long Island
Frfld/Wstchster
New Jersey
Downtown
Midtown
1987 - 20002005 - 2025
A D V I S O R Y G R O U P13
0
5
10
15
20
25
50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01
Squar
e Fee
t (M
illio
ns)
1982-199061.1 MSF6.8 MSF Yr/Avg
ManhattanOffice Construction 1950 - 2001
Source: Cushman & Wakefield Analytics
1998-20018.3 MSF 2.1 MSF Yr/Avg
235.8 MSF or 4.5 MSF Annual Average
A D V I S O R Y G R O U P14
ManhattanSelection of Potential Development Sites
Source: Cushman & Wakefield Analytics
Midtown = 20+ msf
Site MSF
Con Edison 2.5
One Bryant Park 2.1
20 Times Square 1.3
Hotel Pennsylvania 1.1
Roosevelt Hotel 1.0
Downtown = 13-15 msf
Site MSF
World Trade Center 10.0
Site 26/BPC 1.8
55 Water St 0.8
15 William St 0.5
A D V I S O R Y G R O U P15
MidtownOffice Construction 1900 - 2002
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
1900
1906
1912
1918
1924
1930
1936
1942
1948
1954
1960
1966
1972
1978
1984
1990
1996
2002
Sq
uar
e F
eet
East Midtown
West Midtown
7th Ave, Broadway
3rd Ave
6th Ave
Park Ave5th Ave, Madison Ave,Rockefeller Center,
Garment District
Source:, Cushman & Wakefield Analytics
A D V I S O R Y G R O U P16
Source: Economy.com, NYC Planning, NYC Office of Management and Budget, Cushman & Wakefield Analytics
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2,800
3,000
1990
1995
2000
2005
2010
2015
2020
2025
Off
ice-
usi
ng
Em
plo
yees
(000
s)
Historic Forecast
2005-2025 Regional Office-usingEmployment Growth = 443,450
New York Region Office-using Employment by Year1986 – 2025
A D V I S O R Y G R O U P17
New York Region Occupied Office Space per Office-using EmployeeHistoric 1986 – 2001
Sources: Economy.com, Cushman & Wakefield Analytics
0
50
100
150
200
250
300
350
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Sq
uar
e F
eet p
er E
mp
loye
e
A D V I S O R Y G R O U P18
New York Region Office-Using Employment and Office DemandProjected 2005 – 2025
Source: Economy.com, NYC Office of Management and Budget, NYC Planning, Cushman & Wakefield Analytics
ScenarioSquare Feet
Per EmployeeTotal Demand (Square Feet)
Low 200 88,690,000
Base 250 110,862,250
High 300 133,035,000
Total Change in Office-Using Employment = 443,450
A D V I S O R Y G R O U P19
New York RegionChange in Occupied Space by MarketProjected 2005 – 2025
Source: Cushman & Wakefield Analytics
Forecasted Net Absorption (MSF)
Capture Rate* Low Base High
Midtown 40.7% 36.1 45.1 54.1
Downtown 8.7% 7.7 9.6 11.6
New Jersey 35.2% 31.2 39.0 46.8
Fairfield/Westchester 9.2% 8.2 10.2 12.2
Long Island 6.2% 5.5 6.9 8.2
Total 100.0% 88.7 110.9 133.0
*Capture Rate based on recent trends
A D V I S O R Y G R O U P20
Midtown Office Market 2005 - 2025Demand Forecast Assumptions
Regional office-using employment growth of 443,450 results in demand for 89 msf, 111 msf or 133 msf
Midtown absorption represents 40.7% of regional demand
Even with declining market share, Midtown’s office demand will be 36 msf, 45 msf or 54 msf through 2025
Potential Midtown development sites are insufficient to meet future demand (current estimate of 20 msf)
Hudson Yards is forecast to capture 35% to 40% of Midtown’s demand based upon recent Class A development activity
A D V I S O R Y G R O U P21
Hudson Yards Capture Rate of Midtown’s Office DemandProjected Total 2005 – 2025
Source: Cushman & Wakefield Analytics
Forecasted Net Absorption (MSF)
CaptureRate
Low Base High
40% 14.4 18.0 21.7
35% 12.6 15.8 19.0
A D V I S O R Y G R O U P22
Residential
A D V I S O R Y G R O U P23
Residential Development
New York City is largest housing market in the nation– Manhattan comprises 727,000 occupied units
– Manhattan is one of the nation’s tightest housing markets with an estimated vacancy rate of 3.2%
Hudson Yards residential development– Natural extension of West Side residential neighborhoods
– Complements Office expansion
– Enhances 24 hour-7 day use
A D V I S O R Y G R O U P24
Source: Cushman & Wakefield Analytics, Housing and Vacancy Survey (1993, 1996, 1999)
0
200
400
600
800
1,000
1993 1996 1999
Th
ou
san
ds
of U
nit
s
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Renter Occupied Owner Occupied Rental Vacancy Rate
Manhattan Total Occupied UnitsRental Occupied Units vs. Vacancy Rate1993, 1996, 1999
708 704 727
A D V I S O R Y G R O U P25
Source: Cushman & Wakefield Analytics, Economy.com, Corcoran Group, NYC Planning
-10
-5
0
5
10
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Th
ou
san
ds
Households
New Residential Units
ManhattanHousehold Growth vs. Residential Construction1987 – 2004
P r o j e c t e d
A D V I S O R Y G R O U P26
Source: Cushman & Wakefield Analytics, NYC Housing and Vacancy Survey
0
2
4
6
8
10
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01
Th
ou
san
ds
Estimated Units Vacant
Estimated New UnitsAbsorbed
ManhattanEstimated Absorption of New UnitsHistoric 1986 – 2001*
* Applied average vacancy rate of 3.2 percent to number of total new residential units.
A D V I S O R Y G R O U P27
Large-Scale Housing Development on the West Side
Battery Park City6,509 units completed between 1982 and 2001
Average of 361 units per year - roughly one building
An additional 2,931 units are planned
Trump’s Riverside South1,919 units completed between 1997 and 2001
Average of 384 units per year - roughly one building
An additional 3,781 units are planned
A D V I S O R Y G R O U P28
ManhattanTotal New Units vs Hudson Yards Share 1998-2001
Source: Cushman & Wakefield Analytics, NYC Planning
0
2
4
6
8
1998 1999 2000 2001
Th
ou
san
ds
of U
nit
s
Rest of Manhattan Hudson Yards
5,593
418
2,987
249
6,742
9215,712
596
A D V I S O R Y G R O U P29
Source: Cushman & Wakefield Analytics, NYC Planning
0 5 10 15 20
Hudson Yards
Rest ofManhattan
Units (Thousands)
ManhattanHudson Yards Share of Total Manhattan New Units1998-2001
89.6%
10.4%
21,034 Total Units
A D V I S O R Y G R O U P30
Projected new households total 40,480 or 2,024 annually
Replacement housing typically represents 0.5% of existing inventory (727,000 units), or 3,000 to 5,000 units annually
Annual new demand ranges from 5,024 to 7,024 units
Capture rate for Hudson Yards is based on recent strong absorption of 10.4%
Manhattan Residential Market 2005 - 2025Demand Forecast Assumptions
A D V I S O R Y G R O U P31
Hudson Yards Capture Rate of Manhattan’s Housing DemandProjected 2005 – 2025
Source: NYC Housing and Vacancy Survey, NYC Planning, Cushman & Wakefield Analytics
ScenarioTotal Annual
New Units
10.4%Share of
Units
Total * Annual
Square FeetTotal MSF
(2005-2025)
Low 5,024 522 522,000 10.4
Base 6,024 626 626,000 12.5
High 7,024 730 730,000 14.6
* Average unit equals 1,000 square feet
A D V I S O R Y G R O U P32
Hotel
A D V I S O R Y G R O U P33
Hotel Development
Important amenity to support commercial andconvention center activity
Provides for large convention type hotels proximate toJacob Javits Convention Center
Complements 24 hour-7day use of Hudson Yards
A D V I S O R Y G R O U P34
Hotel Market
Comprises 56,000 hotel rooms in Manhattan
Approximately 23,000 are convention style hotel rooms in Midtown
Midtown is the prime hotel location in Manhattan
New development in Hudson Yards will generate demand for hotels within the area
A D V I S O R Y G R O U P35
Hotel Room Demand
Capture rate of Javits room demand and corporate demand from within Hudson Yards remains constant - with roomnightsincreasing as demand generators grow
Capture of non-Javits group, leisure, and corporate demand from beyond Hudson Yards slowly increases over time
Hotel Room Demand and Segmentation
Year 2025Supportable
RoomsYear 2025
SegmentationHudson Yards Corporate 638 22%Other Midtown Corporate 643 22%Javits Convention Center 936 32%Non-Javits Group 257 9%Leisure 477 16%Total 2952 100%
Source: Economics Research Associates
A D V I S O R Y G R O U P36
Hotel Room DemandProjected Room Demand and Inventory2005-2025
-
500
1,000
1,500
2,000
2,500
3,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Room Demand Room Inventory
Source: Economics Research Associates
A D V I S O R Y G R O U P37
Retail
A D V I S O R Y G R O U P38
Retail Development
Retail is a key component to a vital urban neighborhood
Provides extended use and activity both during the day, at night and on weekends
Necessary to support Residential development, as well as Office and Hotel uses
A D V I S O R Y G R O U P39
Retail Market
Retail exists on the West Side along key corridors like West 34th and West 42nd Streets
New employees, residents and visitors will need convenient stores, restaurants and services
A D V I S O R Y G R O U P40
Hudson YardsSupportable Retail Square Feet
Supportable Square Feet by Demand Source
SupportableSquare Feet
Percent of Total
Office Workers 284,000 56%Local Residents 116,000 23%Hotel Guests 68,000 13%Inflow/Visitors 40,000 8%
508,000 100%
Source: Economics Research Associates
A D V I S O R Y G R O U P41
Hudson YardsSupportable Retail Square FeetProjected 2005-2025
0
100,000
200,000
300,000
400,000
500,000
600,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Cum
ulat
ive
Squ
are
Fee
t
Source: Economics Research ssociates
A D V I S O R Y G R O U P42
The Time Frame of the Market Forecast and the Revenue Projection
Real estate development is highly cyclical
Market forecasts reflect 20-year employment outlook
Potential financing approaches likely to require a longer-term revenue projection of 30 - 40 years
For this analysis, we have assumed continued demand growth at same pace from 2025 - 2035
A D V I S O R Y G R O U P43
Hudson Yards Base Case Scenario Development Forecast
Source: Cushman & Wakefield Analytics, Economic Research Associates
2005 - 2025Demand Forecast
Property Type MSF
Office 18.0
Residential 12.5
Hotel 1.0
Retail 0.5
2005 - 2035Financial Forecast Model
Property Type MSF
Office 28.0
Residential 12.5
Hotel 1.5
Retail 0.7
Housing and Hotel development reaches the planning target--and is “built out”--earlier than other uses
A D V I S O R Y G R O U P44
Hudson Yards Redevelopment area is the natural extension of Midtown
The only large land area in Midtown that is underutilized
Proven demand for office, housing, hotel and retail uses
Public policy initiatives are necessary now to enable the long term growth of this strategic Manhattan location
Hudson YardsDemand Forecast Summary“Without taking action to create more space, New York City will missout on hundreds of thousands of new jobs and increased economic activity in the next 20 years.”
-Group of 35, Preparing for the Future, 2001
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