Bloomberg: WeWork Brooklyn Project Gets Backing From Big Developer

Published on July 06, 2015.
Two of New York’s most prominent real estate developers are teaming up on a building for WeWork Cos. at the Brooklyn Navy Yard, the office-sharing company’s first ground-up project.

Boston Properties Inc. and Rudin Management Co. plan a 675,000-square-foot (63,000-square-meter) property that will offer unobstructed views of the Manhattan skyline, to be built on a strip of land jutting into Wallabout Bay between two dry docks. The $380 million project, set to be unveiled Monday, will be the first in Brooklyn for both Boston Properties, the largest U.S. office real estate investment trust, and Rudin, a family-owned company that’s marking its 110th year in business.

The foray by the developers is a testament to Brooklyn’s strength as an emerging office market, with growing demand from young media and technology companies whose employees largely live in the borough. The project would extend a New York leasing spree for WeWork, a five-year-old provider of collaborative workspace that raised financing last month at a $10 billion valuation.

WeWork’s plan and other initiatives at the yard tell an “extraordinary story about the strength of the innovation economy in New York,” Alicia Glen, deputy mayor for housing and economic development, said in an interview. “By having WeWork there, and having that sort of youthful entrepreneurial energy atop what’s already going on there, it’s like the perfect recipe for more and greater companies growing and expanding in New York City.”

Trendy Design

WeWork has leased about 1.65 million square feet of offices since the start of 2011, or more than half the office space at 1 World Trade Center, according to research firm CompStak Inc. On its website, WeWork lists 15 Manhattan locations and one in Brooklyn’s Dumbo section.

The company oversaw the design of the Navy Yard building, in which it will take 222,000 square feet, according to a statement from the development partners. Construction is set to start late this year and be completed in 2017.

The design firm S9 Architecture has incorporated many of the trendy features that have drawn tech tenants to refurbished factories in Manhattan, Chicago and San Francisco, including 14-foot (4.3-meter) ceilings and open offices designed to encourage interaction. Plans also call for specialty food vendors, a massage room, valet bicycle parking, outdoor terraces, a rooftop conference center and a basketball court that would be open to all Navy Yard workers.

The Future’

WeWork is “creating an environment that we think is the future of real estate,” said William Rudin, Rudin Management’s chief executive officer.

Rudin and Mort Zuckerman, chairman of Boston Properties, whose signature assets include Manhattan’s General Motors Building, were early investors in WeWork, contributing personal funds rather than corporate money.

Adam Neumann, WeWork’s CEO, said the company sometimes faces limitations in the buildings it leases because it didn’t play a role in their design. He developed the idea for the building at the Navy Yard after he toured the property and was impressed by its combination of offices and light manufacturing. He then chose the developers.

“We got to design this from bottom up, which means that everything about it is built to foster collaboration,” said Neumann, who co-founded the company in Manhattan’s Soho section in 2010. “There is nothing like this building built in the world today. Everything from where the elevators are located to how big is the cafeteria.”

Miami, London

Neumann said he sees the building as a model for WeWork developments across the country, including three more in the New York area, plus San Francisco, Miami and London.

The Brooklyn project’s developers, equal partners in their joint venture, will seek rents of at least $60 a square foot, said John Powers, Boston Properties’ New York regional manager. The average in nearby Dumbo, the neighborhood between the Manhattan and Brooklyn bridges that commands the borough’s highest office rents, is $62.42 a square foot, according to brokerage Jones Lang LaSalle Inc.

“This will be the highest-end product in the tech market in New York,” Powers said. The project is the second-largest at the Navy Yard since the city acquired the 300-acre (121-hectare) property from the Defense Department in 1966. Only the Steiner Studios film-production facility, opened in 2004, was bigger.

Adding Jobs

The construction is a key part of a plan to bring jobs back to the yard, which lost 12,000 positions when the Navy moved out, said David Ehrenberg, who runs the property. The new building will support about 4,000 workers when it’s operating fully, he said. Under an agreement with the city, tenants must pay all their employees a living wage of at least $13.30 an hour, according to Powers. The state minimum wage will be $9 as of the end of this year.
The partners have been watching the evolution of real estate in Brooklyn for a long time, Rudin and Powers said. While in New York, Boston Properties is known for its Midtown skyscrapers housing mostly law and securities firms, “we have tech in our DNA, going back from our first building,” in Cambridge, Massachusetts, Powers said.
“We’re the biggest landlord in Cambridge,” he said. “One of our big markets is San Francisco. We have a portfolio that has a high percentage in tech. In New York, that never really happened, but we certainly want it to happen.”

Regina Glick

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