A city within a city is rising in Manhattan.
Nearly two decades after planning began, the gates have officially opened at Hudson Yards, the mixed-use mega-development set to reshape the landscape of New York City's far west side. At $25 billion, the city's newest neighborhood is the most expensive private real estate development in US history. It is also one of the largest, spanning more than 18 million square feet, including 14 acres of public space—bigger than the United Nations or the World Trade Center.
Built over an old rail yard near the Hudson River, the project has 13 buildings, including a school, parks and office towers that will bring some 55,000 employees. Alongside that, luxury apartments, a 720,000-square-foot shopping zone and high-end restaurants run by star chefs such as David Chang and Thomas Keller.
Among the other attractions:
- The observatory near the top of 30 Hudson Yards—billed as one of the highest outdoor decks in the Western Hemisphere, at 1,100 feet
- The Vessel, a colossal public sculpture with more than 150 interconnected stairways to climb
- The Shed, a retractable, four-story performing arts center
While few real estate developments come close to rivaling Hudson Yards in sheer scale, the project is seen as a model of the mixed-use development trend that is taking hold in a number of cities across the country, according to Jonathan Woloshin, UBS Real Estate & Lodging Analyst.
That's really the Hudson Yards story—mixed use—and it's a trend you're likely to see more and more of in commercial real estate.
"That's really the Hudson Yards story—mixed use," he says, "and it's a trend you're likely to see more and more of in commercial real estate, particularly for projects with a big retail component."
Mixed-use development combines residential and commercial uses in close proximity, creating a self-contained "live-work-play" environment. With an array of offerings at one site, these developments can make it easier for residents and visitors to transition from work time to personal time and back. For employers opening offices in these facilities, the proximity to entertainment and retail is seen as a way to attract young talent. And for developers, integrating various elements of a mixed-use project can help diversify the risk of any one asset class.
Other largescale urban mixed-use projects include Millennium Tower in Boston, Brickell City Centre in Miami, CityPoint in Brooklyn and District Wharf in Washington, D.C.
Though mixed-use development is not new, its popularity today is being driven in large part by younger consumers—"millennials who value their time and experiences more" than past generations, says Woloshin. "It's what the Kinks song says: 'Give the people what they want.' Well, this is what they want."
For mall owners reeling from rising store closures, this form of development offers a way to preserve or even increase the value of their properties. Many owners today are converting the cavernous spaces left vacant by shuttered department stores and other big-box retailers into mixed-use facilities, courting hotels, apartments, co-working spaces and other tenants in a bid to attract a clientele who might otherwise shop online.
A case in point, says Woloshin, is the Simon Property Group's King of Prussia mall outside Philadelphia, one of the largest malls in the US. There, Simon is planning to build an outdoor plaza, residences, a hotel and an office building to fill a J.C. Penney store that closed in 2017.
Such projects wouldn't be possible for developers without attractive financing options in today's market. "This is why access to capital is so important," Woloshin says, "because you have to have the money to be able to do it."
Many retail property owners today are converting the spaces left vacant by shuttered big-box retailers into mixed-use facilities.