When Hudson Yards opened in 2019 as the largest private enterprise in American history, it aspired to transform Manhattan’s Far West Side with a variety of ultra-luxurious condos, office towers for powerful companies like Facebook and a mall with coveted international brands and restaurants by celebrity chefs like José Andrés.
All of this surrounding a copper-colored sculpture that would be for New York what the Eiffel Tower is for Paris.
But the pandemic devastated New York City’s housing market and its $ 25 billion flagship venture, raising significant questions about the future of Hudson Yards.
Hundreds of condominiums have not yet been sold and the mall has no customers. Its anchor tenant, Neiman Marcus, filed for bankruptcy and closed definitively, and at least four other stores, in addition to several restaurants, also closed their doors.
The centerpiece of the venture, the 150-foot-tall, scalable structure known as the Vessel, closed to visitors in January after a third suicide in less than a year. The office buildings, whose workers supported many of the shops and restaurants, have been largely empty since last spring.
Even more dangerous, Hudson Yards’ promised second phase – eight additional buildings, including a school, plus luxury condominiums and offices – looks on indefinite hold as the developer, Related Companies, seeks federal funding for a nearly 10-acre platform on which will be built.
Related, which said the entire project would be completed in 2024, no longer offers an estimated completion date.
The project’s problems are, in many ways, a microcosm of the broader challenges the city faces in trying to recover.
Related said it was counting on wealthy shoppers filling its condos and customers with many pockets filling 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 home – and keeping foreign buyers and tourists away – it is unclear when, or if, demand will reactivate due to the vast supply of luxury nests and top-tier offices that fill the horizon. of the city.
“The challenges facing Hudson Yards are not unique,” said Danny Ismail, an analyst and office coverage leader at real estate research firm Green Street Advisors. “All commercial real estate in New York City has been affected by Covid-19. However, I would say that after the pandemic, Hudson Yards and the surrounding area will be one of the best office markets in New York City. “
Hudson Yards’ creation crowned nearly 30 years of planning for the last major undeveloped lot in Manhattan, an industrial site between Pennsylvania Station and the Hudson River.
It is New York’s largest public-private enterprise and the largest city development since the Rockefeller Center in the 1930s, aided by about $ 6 billion in tax breaks and other government aid, including the expansion of the subway to the West Side . Even with the expansion of the subway, Hudson Yards is still relatively isolated from the rest of Manhattan, away from the busiest avenues for tourists, shoppers and workers.
Related acknowledged that he was facing the same financial problems as the rest of the city, but said that tenants were still moving into the project’s office buildings and that Hudson Yards would eventually recover.
Four office buildings in Hudson Yards – including 50 Hudson Yards, which are under construction – are 93 percent leased, said a spokesman for Related, although it is unclear how much of this happened last year. Facebook signed a lease in late 2019 for about 1.5 million square feet.
“Our strong rental of offices, even during the pandemic, is why we are well positioned to lead Covid’s New York return and why adjacent neighborhoods and the entire West Side will recover faster,” said the spokesman. Jon Weinstein voice.
Still, the problems faced by Hudson Yards led Related to rethink its plans.
Led by its billionaire founder Stephen M. Ross, the company started building Hudson Yards in two phases. The first phase, opened in 2019, has four office towers, two residential buildings, a hotel and the mall.
The second part was to include 3,000 homes in eight buildings near the Hudson River, as well as a 750-seat public school and hundreds of low-cost rental units. At least 265 apartments must be “permanently accessible”, according to a 2009 agreement between the City and Associates.
In total, Hudson Yards was expected to span 28 acres over existing rail yards and cover 18 million square feet of space, almost twice the size of downtown Phoenix.
The developer considered a number of new options, including even a casino, although that idea is no longer the front and center, according to Mr. Weinstein.
Related cannot build the second half until it builds a deck over the rail yard. The company, along with Amtrak, is in talks with the federal Department of Transportation on a low-interest loan to finance the platform and preserve the right of way for a new rail tunnel under the Hudson that Amtrak is planning to build.
Related is seeking more than $ 2 billion, according to two officials informed about the proposal who were not allowed to discuss it publicly.
“The home is going to have to recover, or they switch and look at a different product mix there,” said Robert Alexander, president of the Tristate region for real estate brokerage CBRE, which is a marketing space at Hudson Yards. “For me, it’s a great development site and there are very, very few major development sites in New York.”
Related is also facing pressure from its investors to provide more complete project finance accounting. A group of 35 investors from China – a slice of the nearly 2,400 that contributed $ 1.2 billion to Hudson Yards – sued the company last year, accusing it of refusing to open its books or saying when it could repay your investments.
An arbitrator in the case recently denied investors’ claims and decided that Related was not required to disclose detailed financial information.
The firm’s lawyers said Hudson Yards was experiencing “significant headwinds as a result of Covid-19” and that, due to the economic downturn and blocking restrictions, it may be unable to recover its investment in at least one property there, 35 Hudson Yards, a mixed-use tower with a hotel, according to the case records obtained by The New York Times.
Another group of Chinese investors, whose contributions of $ 500,000 per person were part of a United States visa program that may grant them a path to citizenship, is also considering filing a similar lawsuit against Related, according to a person aware of the situation who was not allowed to speak publicly.
Related made it clear before the outbreak that it intended to earn most of its money at Hudson Yards through its condominiums and mall, as Ross said it was renting offices at cost without making a profit.
The pandemic has revealed the difficult faces of the road. In 2020, 30 residential units were sold at Hudson Yards, compared with 157 the previous year, according to an analysis for The Times by the valuation firm Miller Samuel.
So far this year, several condos are under contract at Hudson Yards, according to Related, a possible sign that the market may be stabilizing.
Still, Manhattan has a record number of condos for sale at the moment, especially luxury units like the Hudson Yards, and it could take years for sales to really recover, according to Nancy Wu, an economist at StreetEasy.
“Hudson Yards was built for a buyer who is no longer there and maybe partly a tenant who is no longer there, and was someone who wanted to live in Manhattan, but not in the city itself,” said Richard Florida, professor at the Rotman School of Management and School of Cities at the University of Toronto, referring to the homogeneity of development and the somewhat isolated location.
The retail picture is also bleak. The vast space occupied by the failed Neiman Marcus store will no longer be occupied by another retailer. Instead, Related will convert you to more offices.
Meanwhile, the company intervened in Neiman Marcus’s bankruptcy case, claiming that the department store owes $ 16 million for canceling the lease and an additional $ 129,000 for removing its signage across the mall, including a giant sign. hanging in a five-story glass atrium building.
Although the mall was closed for blocking orders from mid-March to early September, shoppers are still absent.
Related has struggled with its other besieged tenants, even threatening stores with fines of $ 1,500 a day for failing to remain open after the mall reopened.
Several stores, including Forty Five Ten, a luxury clothing store in Dallas that opened alongside Neiman Marcus, have closed for good. The mall opened with 79 stores and now has 89, said Related.
Related said the mall had added at least 11 stores since September, including Herman Miller, Levi’s and Sunglass Hut.
In the weeks before Christmas, tourists and office workers were in short supply and some stores were still closed, while others, such as Rolex, were only open by appointment. The mall’s employees far outnumbered shoppers inside the cavernous building, where the most crowded place seemed to be the Blue Bottle Coffee line.
Traffic during the week at Hudson Yards subway station, part of the extension of line 7 that the city paid to help make development possible, fell to an average of 6,500 passengers in December, a sharp drop from the daily average of 20,000 in 2019, according to the Metropolitan Transportation Authority, which operates the metro.
The lack of shoppers in the mall reduced Related’s revenue because the company has structured some retail rentals so that stores pay rent based on a percentage of their monthly sales. In addition, several leases were specifically linked to Neiman Marcus’ fate – if it closed, smaller stores would not have to pay rent or could cancel their rent without a penalty.
Related declined to comment on its terms to tenants, including whether any of them were withholding rent.
Weinstein, the company’s spokesman, said retailing “will always be a key 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 stretch of Manhattan along the West Side that is becoming an important technology corridor.
The development attracted many 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 City will be fine and Hudson Yards will be fine,” said Florida. “Is Hudson Yards the same as it was imagined? That is the open question. “