How the Pandemic Left the $25 Billion Hudson Yards Eerily Deserted

on Feb6
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When Hudson Yards opened in 2019 as the largest private development in American history, it aspired to transform Manhattan’s Far West Side with a sleek spread of ultraluxury condominiums, office towers for powerhouse companies like Facebook, and a mall with coveted international brands and restaurants by celebrity chefs like José Andrés.

All of it surrounded a copper-colored sculpture that would be to New York what the Eiffel Tower is to Paris.

But the pandemic has ravaged New York City’s real estate market and its premier, $25 billion development, raising significant questions about the future of Hudson Yards.

Hundreds of condominiums remain unsold, and the mall is barren of customers. Its anchor tenant, Neiman Marcus, filed for bankruptcy and closed permanently, and at least four other stores, as well as several restaurants, have also gone out of business.

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 not clear when, or if, demand will reignite for the vast supply of upscale aeries and blue-chip office space crowding the city’s skyline.

“The challenges facing Hudson Yards aren’t unique,” said Danny Ismail, an analyst and lead of office coverage for the real estate research firm Green Street Advisors. “All commercial real estate in New York City has been impacted by Covid-19. However, I would argue that post-pandemic, Hudson Yards and the area around it will be one of the better office markets in New York City.”

“Our strong office leasing, even during the pandemic, is why we’re well positioned to lead New York’s comeback from Covid and why the adjacent neighborhoods and the entire West Side will recover faster,” the spokesman, Jon Weinstein, said.

Related has been seeking more than $2 billion, according to two officials briefed on the proposal who were not permitted to discuss it publicly.

“The residential is going to have to recover, or they switch it up and look at a different product mix over there,” said Robert Alexander, chairman of the tristate region for the real estate brokerage CBRE, which is marketing space at Hudson Yards. “To me, it’s a major development site and there’s very, very, very few major development sites in New York.”

Related is also facing pressure from its investors to deliver a fuller accounting of the project’s finances. A group of 35 investors from China — a sliver of the roughly 2,400 who contributed $1.2 billion to Hudson Yards — sued the company last year, accusing it of refusing to open its books or say when it might repay their investments.

The retail picture is also bleak. The vast space occupied by the failed Neiman Marcus store will no longer be taken by another retailer. Instead, Related will convert it into more offices.

In the meantime, the company has intervened in Neiman Marcus’s bankruptcy case claiming that the department store owes $16 million for breaking its lease and an additional $129,000 for the removal of its signage throughout the mall, including a giant sign that hung in a five-story glass atrium.

While the mall was closed by lockdown orders from mid-March to early September, shoppers are still largely absent.

Related has battled its other beleaguered retail tenants, even threatening stores with $1,500 per day fines for failing to stay open after the mall reopened.

Several stores, including Forty Five Ten, a luxury clothing store from Dallas that opened alongside Neiman Marcus, have shuttered permanently. The mall opened with 79 stores and now has 89, Related said.

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 like Rolex were open by appointment only. Mall employees far outnumbered shoppers inside the cavernous building, where the most crowded spot seemed to be the line at Blue Bottle Coffee.

Weekday traffic at the Hudson Yards subway station, part of the No. 7 line extension the city paid for to help make the development possible, plunged to an average of 6,500 riders in December, a sharp drop from the 20,000 daily average in 2019, according to the Metropolitan Transportation Authority, which runs the subway.

The lack of shoppers at the mall has cut into Related’s revenue because the company structured some retail leases so that shops pay rent based on a percentage of their monthly sales. In addition, a number of leases were specifically tied to the fate of Neiman Marcus — if it closed, smaller stores would not have to pay rent or could break their leases without penalty.

Related would not comment about its terms with tenants, including whether any were withholding rent payments.

Mr. Weinstein, the company spokesman, said that retail would “always be a key element of our new neighborhood.”

Despite the uncertainty, Hudson Yards has already helped turn the neighborhood into a key business district and part of a stretch of Manhattan along the West Side that is becoming a major tech corridor.

The development has attracted a who’s who of 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,” Mr. Florida said. “Will Hudson Yards be the same as it is envisioned? That’s the open question.”

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