Crains New York - September 17, 2012 - (Page 13)

REPORT R E A L E S TAT E INSIDE The List NY’s largest real estate investment trusts PAGE 15 Real Estate Deals Golden Lioness bags AXA unit in Brooklyn, and more PAGE 16 BIG DEALS: SL Green’s Steven Durels calls small tenants the “biggest force” in the market today. Hip crowd reshapes Bowery triangle Creative vibe draws Web firms, trendy retailers and pricey condos BY KERRY MURTHA Just three years ago, the owner of 411 Lafayette St. emptied all but a third of the space in the handsome six-story brick-and-masonry building, spent $6 million fixing it up, and waited. Steve Meringoff,a principal at real estate investment firm Himmel + Meringoff, which has owned the building for nearly 30 years, recalled the experience as “painful.” Happily, it also paid off. Today, 411 Lafayette is fully occupied, with tenants that include two media companies, a photography studio and administrative offices for New York University. Meanwhile, the ground-floor space in the 103,000-square-foot building was recently used to stage a photo show chronicling the lives of New York City sanitation workers. “There’s a new breed of tenants here that are driving the market,” said Mr. Meringoff, who noted that per-square-foot office rents in the area have jumped by about $20 in the past five years, to $50. In fact, the narrow, eightblock-long triangular slice of lower Manhattan running north along Lafayette Street from East Houston Street up to Astor Place, and from Lafayette one block east to Bowery, is becoming Manhattan’s newest hot spot. It boasts an eclectic mix of office, hotel, residential, academic and cultural tenants. At the base of the triangle on the south side of Houston Street, Kushner Cos. has renovated the landmarked 126-year-old Puck Building at 295 Lafayette St.Two blocks up is newly trendy Bond Street, with its starchitectdesigned condominiums. And up at the top of the triangle,developer Edward Minskoff is erecting 51 Astor Place, which is expected to boast the highest-priced office See HIP CROWD on Page 14 buck ennis Subdivide and conquer Landlords go where the action is and cater to smaller outfits as big tenants sit tight BY STEPHEN KLEEGE Last year, with a total of 100,000 square feet of vacant office space spread among several floors at 535545 Fifth Ave., Moinian Group could have taken the usual approach: shift tenants around to create a large contiguous block of space and then seek a single blue-chip tenant to fill it. Instead, the landlord did the opposite, breaking up those units into stillsmaller pieces. “We’re knocking out 3,000- to 7,000-square-footers left and right,’’ said Gregg Weisser, Moinian’s executive managing director of leasing. Working with Cushman & Wakefield Inc., Moinian signed up tenants for nearly half the space in the blocklong property between East 44th and 45th streets in just seven months, luring Media 3, Canadian Television Sales Inc., Sandeep Diamond Corp. LION’S SHARE Leases of 2,500 square feet or less as percentage of total 52% 36% 2008 2012 Source: Commercial Tenant Real Estate Representation Ltd. and others. “We have healthy tenants filling the building,as opposed to waiting for the few 20,000-square-footers that everyone chases heavily in this marketplace,” said Mr. Weisser. It is an increasingly common tale. Traditionally, given a choice between leasing space to an army of small tenants with all the attendant hassles and expenses over the lives of their leases, many landlords hold out for largespace users. But a slow economy, a paucity of big tenants in the market and finicky lenders keen not to have See SUBDIVIDE on Page 14 September 17, 2012 | Crain’s New York Business | 13

Table of Contents for the Digital Edition of Crains New York - September 17, 2012

IN THE BOROUGHS
IN THE MARKETS
THE INSIDER
BUSINESS PEOPLE
OPINION
GREG DAVID
SMALL BUSINESS
REPORT: REAL ESTATE
THE LIST
REAL ESTATE DEALS
FOR THE RECORD
CLASSIFIEDS
NEW YORK, NEW YORK
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crains New York - September 17, 2012