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Real Estate NEWS › REAL ESTATE
January 8, 2016 Updated 01/08/2016
Developers take risk by starting construction on SoHo office building without a tenant in place
Related and LargaVista originally planned to secure an anchor tenant before breaking ground on 300 Lafayette St.
By Daniel Geiger
The Related Cos. will begin construction of a proposed boutique office building in SoHo, reversing its initial plan to first secure a tenant before starting the project.
The developer, which is building the $20 billion Hudson Yards complex on the far West Side, will break ground on 300 Lafayette St. in the next few months, according to a Related spokeswoman. “We have had very strong interest in the building and the marquee location,” she said.
Designed by Cookfox Architects, the seven-story terra-cotta and limestone building will have 30,000 square feet of retail and 53,000 square feet of office space. Related is developing the estimated $200 million project, located along East Houston Street across the street from the Puck Building on a site that is occupied by a BP gas station, in partnership with LargaVista Companies, a real estate investment and development firm.
Related is one of several developers in the process of building boutique office buildings that appeal to a growing group of deep-pocketed tenants like hedge funds, private-equity firms and tech tenants which seek exclusive, state-of-the-art offices in hip locations with alluring amenities.
300 Lafayette will have abundant outdoor space, with a roof deck and expansive terraces on each floor, according to the project’s developers. Related and LargaVista aim to finish 300 Lafayette in 2018.
Developers typically need to find an anchor tenant in order to establish a source of income that will help to finance the construction of the development. But like other boutique-office developers, Related discovered that it would have to take a risk and construct the building without a tenant in hand because small-sized office tenants do not make decisions on their office space years in advance. Instead they sign leases closer to when they are ready to make a move. Such tenants also prefer to see finished office space before shelling out as much as $150 per square foot for rent—double the average asking rate in midtown for similar high-end space.
SoHo, like much of the midtown south neighborhood around it, has become a coveted area for office tenants. Related also plans to tap into the SoHo’s strong retail market. Prime storefront space there now leases for as much as $1,000 per square foot.
