Lower Manhattan’s World Financial Center, the 8 million-square-foot complex near the Hudson River, will soon have a new identity as owner Brookfield Office Properties Inc. (BPO) seeks to attract a shifting mix of tenants.
By late next year, the property will be known as Brookfield Place, said Mitchell Rudin, the company’s president of U.S. commercial operations. The landlord has already started the process, with its website referring to the new name under the current one.
The change reflects the smaller role finance plays in lower Manhattan as Brookfield faces vacancies at the site. Bank of America Corp. (BAC:US) is leaving almost 3 million square feet (279,000 square meters) inherited with its 2009 takeover of Merrill Lynch & Co., which was based at the property. Its leases expire next year in what Green Street Advisors Inc.’s Michael Knott calls a “perfect real estate storm” because it coincides with two new towers at the nearby World Trade Center becoming available and a broader slowdown in leasing by financial firms.
“We’ve seen many tenants in media, entertainment, law, consumer products, in addition to seeing tenants in the financial sector,” Rudin said in a telephone interview. “The non-financial tenants have indicated to varying degrees that it was not appealing to be in a complex that was denominated financial. So we decided to accommodate that.”
The World Financial Center, built in the 1980s, was designed by Cesar Pelli to accommodate top global finance firms. Besides Merrill, it was also home to Lehman Brothers Holdings Inc. until the 2001 terrorist attacks at the World Trade Center heavily damaged the company’s offices at 3 World Financial Center. The now-defunct investment bank moved to Midtown. American Express Co. (AXP:US) remains headquartered at the complex.
Brookfield, which owns office buildings in the U.S., London, Australia and its original home in Canada, has started a rebranding campaign that reflects “the changing demographics of lower Manhattan and the companies and industries relocating to the area,” according to a memo to employees.
Information technology and media have been the most aggressive customers of Manhattan office space. They accounted for 23 percent of leasing volume in the third quarter, compared with only 11 percent for financial services, according to a report by Cresa, a brokerage that that represents tenants. Banks and financial firms have announced about 60,000 job cuts worldwide this year, data compiled by Bloomberg show.
Knott, a REIT analyst (BPO:US) with Newport Beach, California-based Green Street, estimated that it may cost Brookfield about $70 a square foot to alter and subdivide the former Merrill offices to make them more compatible to non-financial tenants. That’s probably going to be more than the annual rent it can achieve, he said. Asking rents averaged $61 a square foot in the trade Center/financial center submarket in the third quarter, according to a report by brokerage Newmark Grubb Knight Frank.
“Getting ‘financial’ out of the name is smart, but it’s not a silver bullet,” Knott said. “The leasing task in front of them remains monumental.”
The new name has been well-received so far, Rudin said.
“We had a terrific broker event, we had several hundred senior members of the brokerage community here, and everyone that raised the issue thought it was absolutely the right thing to do,” he said. “It eliminates a hurdle for some of them at least as they’d been thinking about the now-World Financial Center for their non-financial tenants.”
Though they intend to accommodate some smaller tenants, “we’re not going to be changing the inherent nature of the complex in terms of size,” Rudin said. He estimated that the 3 million square feet will eventually be filled by companies that number in the “high single digits.”
The Brookfield Place logo will start going up around the complex gradually over the next year, and will culminate when the company opens the new entry pavilion on West Street to the Winter Garden atrium, when the current name will be “retired,” according to the memo. Brookfield is spending about $250 million remaking the retail concourse, adding waterfront dining, a gourmet food marketplace, and high-end fashion shops.
Along with the renaming of the complex, the individual buildings will be known instead by their street addresses, the memo said. One World Financial will be called 200 Liberty St., 2 World Financial will be 225 Liberty, 3 World Financial will be 200 Vesey St. and 4 World Financial -- Merrill’s former headquarters -- will be 250 Vesey.
The company already has Brookfield Places in Toronto and Perth, Australia. Toronto’s Brookfield Place, a 2.6 million- square-foot, two-tower property, is the home of the Hockey Hall of Fame.
Rudin said he’d put the financial center’s “buzz up any day” against midtown south, the area between Midtown and lower Manhattan where demand from technology, media, fashion and advertising firms has driven vacancy rates to the lowest in the U.S. The mix of vintage buildings both to live and work in, restaurants, parks and nightclubs has made the area attractive to so-called creative firms, said Robert Stella, senior vice president of Cresa New York.
The soon-to-be Brookfield Place has all those attractions, along with proximity to the Hudson River, Rudin said. It also offers Arts Brookfield, a year-round series of free performances and exhibits that have included parts of the River to River and Tribeca Film festivals. It’s surrounded by a community of high- rise apartment buildings known as Battery Park City.
“It’s not only what the buildings look like but the environment that surrounds it,” Rudin said. “You find people running in the morning or after work, getting on their bikes, getting on a skateboard, taking a yoga class outside. Where else can you do that on the water but here?”
Technology and creative firms will inevitably have to consider spaces like the ones Brookfield has to offer, Stella said. The company has the “deep pockets” to accommodate a wide range of tenants, he said.
“Midtown south, much as everybody likes it, doesn’t have enough space to accommodate the demand,” he said. If landlords in the area “ keep raising the price, other places are going to look more attractive.”
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