NY Times
Rents Falling in New York’s Garment District
By J. ALEX TARQUINIO
Published: February 10, 2009
When models glide along the catwalks in Bryant Park during the Mercedes-Benz
Fashion Week, which begins Friday, the economic scene will be far worse than it was during the previous Fashion Week last September. So it may seem counterintuitive that some New York fashion industry workers see a silver lining to the economic downturn — it helps them preserve their toehold in the city’s garment district.
“In a sense, we have a reprieve,” said Nanette Lepore, a New York fashion designer who manufactures 85 percent of her clothing line in almost 30 independent factories within a few blocks of her office on West 35th Street. “But we’ll be back in this battle again, if we don’t decide that the garment district is important to the heritage of New York.”
During the Fashion Week in September, Ms. Lepore took her final bow wearing a T-shirt that read “Save the Garment Center.” That plea is part of an informal grass-roots campaign that aims to keep rents affordable for the small pattern-cutters and trim shops that call the district home.
High rents are hardly the only problems plaguing the city’s fashion industry. Employment in the apparel trades has been shrinking drastically for decades, as tens of thousands of jobs have moved to China and other low-wage countries. After peaking around 275,000 in the 1950s, the number of apparel manufacturing jobs in New York has steadily declined to around 20,000 today, according to Barbara Byrne Denham, the chief economist at Eastern Consolidated, a New York broker.
Some fashion designers like Ms. Lepore say that unless the remaining core apparel industry is preserved, it will be difficult for them to design their fashion lines in New York — and next to impossible for young designers coming out of school to set up shop in the garment district, which spans the West Side of
Manhattan on streets numbered in the 30s.
The average asking rents for office space in the district soared 78 percent in the three years from the end of 2004, peaking at almost $55 a square foot a year in November 2007. But asking rents have fallen back 23 percent since then, to around $42, according to Colliers ABR, a real estate broker in New York. That is still much higher than the rents of around $30 that prevailed four years ago.
But current rents are low relative to many other office areas, in part because most of the buildings are old, unrenovated factories. For example, in Times Square, which borders the garment district, the average annual asking rent is $76.33 a square foot. But Colliers estimates that 85 percent of the office space in Times Square is in modern well-equipped buildings — classified as Class A space — while only 16 percent of the garment district is Class A.
Zoning laws have long required landlords to rent much of the commercial space in the garment district to apparel companies, but the city eased some of those restrictions in 2005. The new rules made it easier for landlords to convert some former apparel factories to office space, especially along the avenues and on the western fringe of the district.
Even some of the companies that are thriving — like apparel importers and wholesalers — have started moving their showrooms off the avenues to side streets. Barbara Randall, the president of the Fashion Center Business Improvement District, said there was still strong demand for showroom space in the district, “but there is a trend for them to move to the side streets, as the buildings on the avenues convert to offices.”
Ms. Denham at Eastern Consolidated said that in the last decade, rising rents in more upscale office markets in Manhattan have pushed businesses as varied as advertising agencies and accountants to relocate to the garment district.
But that demand may be easing a bit. She speculated that in the current downturn, falling rents elsewhere might prompt some companies to start seeking bargains in more traditional office markets, like the West 50s or Rockefeller Center.
Brokers who represent tenants in the garment district say that lately some landlords have become more accommodating.
Nicky Heryet, a principal at Colliers ABR, said that, for example, she has a client who eventually wants to combine several apparel showrooms and sales offices into one large space; in the interim, the company does not want to commit to long-term lease renewals.
She recently negotiated a five-month renewal for her client for a 21,000-square-foot space and a six-month renewal for a 50,000-square-foot space. Typically, office leases in New York last 10 years, and Ms. Heryet said that landlords would generally not have signed such short-term deals when the real estate market was strong. “But now the landlords figure that any cash flow is better than no cash flow,” she said.
The changing balance of power may be seen in the differing approaches that a local real estate family has taken with two buildings in the garment district: 1359 Broadway, at the northwest corner of West 36th Street, and 1400 Broadway, at the northeast corner of West 38th Street.
Both buildings are owned by real estate partnerships led by
Peter L. Malkin and his son Anthony E. Malkin, who own stakes in many prominent buildings in this part of Midtown Manhattan, including the
Empire State Building. Both Broadway buildings are former garment factories, made of brick and steel in the early 20th century.
Earlier in this decade, at the start of the city’s real estate boom, the Malkins did not renew the leases of several small apparel companies at 1359 Broadway. They then renovated the 22-story 500,000-square-foot building from top to bottom. Once that was complete, “we weren’t going to retenant the building with apparel companies,” said Brian S. Waterman, a principal at Newmark Knight Frank, who is the leasing agent for both of the buildings.
But, Mr. Waterman added, “that was a different market.” Today, the Malkins are in the midst of a thorough overhaul of 1400 Broadway, a 37-story building with 930,000 square feet.
This time, they are taking steps to make the building more attractive to the apparel industry, in part by prebuilding fashion showrooms. So far, the lobby has been spruced up, and work is in progress on the elevators, bathrooms and electrical system.
Mr. Waterman said they hoped to attract fashion designers and garment showrooms to the building, although not apparel manufacturing companies.