Managing an Icon

The most famous commercial buildings face unique challenges.

Owning and Running the most recognizable office buildings in the world can create headaches that usually don’t come with other kinds of commercial real estate.

How, for instance, do you shepherd millions of tourists a year through the lobby without annoying tenants? And how do you get the message out that the building is a working commercial property and not just a place where sightseers come to take pictures?

W&H Properties, owner of the Empire State Building, is to trying to change the building’s image in the minds of New York’s powerful leasing brokers. To do so, the firm has undertaken a $500 million renovation meant to restore some of the 1931 building’s original look — for instance, by removing the drop ceilings added in the 1950s and outfitting the guards in new maroon Art Deco uniforms.

“What is most interesting is that it is not about leasing space but rebuilding a brand. The building was not performing up to its capabilities,” says Stephen Eynon, who handles leasing for the Empire State Building at CB Richard Ellis.

The Empire State Building has long been seen as a tired property that catered to small tenants and had a number of side businesses, such as licensing its name and image and leasing space for broadcast towers. But when W&H Properties undertook to manage its building four years ago, president Anthony Malkin said the firm’s primary function was to reestablish the Empire State Building as an up-to-date space for commercial tenants.“It is a challenge,” Malkin notes. At a reception W&H held for leasing brokers, “I asked for a show of hands of who had been to the building before, as a broker not as a tourist,” Malkin says. “Only three people raised their hands.”

Broadway Partners, a firm that owns and manages commercial real estate, is working on a similar repositioning campaign for Boston’s John Hancock Tower, designed by I.M. Pei and Henry Cobb and finished in 1976. Broadway acquired the 60-story, 1.75 million-square-foot office building in 2006 and wants to attract more occupants from the worlds of money management and private equity.

“We are looking for higher-quality tenants,” says Jonathan Yormack, a principal at the management firm. “The building has amazing, unobstructed views, and we are finding that tenants are paying up to build out their space.”

Doing renovations on a well-known property, however, isn’t the easiest game in town. Broadway Partners wants to improve the lobby and the plaza in front of the building. “We had to consult with the original architects, governmental agencies and the community,” Yormack says. “When you own an iconic building, there are many more constituents who care. It’s a much broader group than is usually involved in a lobby renovation.”

W&H Properties has been redoing the Empire State Building’s corridors, lighting, bathrooms and elevators. Restoring the lobby’s 1930s look, including replicating the original glass light fixtures, which are now part of the collection of the Corning Museum of Glass, in Corning, New York, has involved substantial con-sultations with the New York City Landmarks Preservation Commission, according to W&H’s Malkin.

The repositioning effort is bearing fruit. Three full-floor leases were signed last year, including one for a floor that had been vacant for six years. “W&H’s focus is on taking what used to be 860 individual suites and instead leasing larger suites and full floors,” Malkin says.

Another challenge is balancing the needs of the office tenants with those of the nearly 4 million sightseers who visit each year. “We wanted to avoid the carnival atmosphere that can create,” Malkin says. W&H has moved the tourist entrance to Fifth Avenue; tenants now enter the building on cross streets.

The Empire State Building, whose image is trademarked, has a dedicated marketing manager who is frequently approached with potential licensing deals. “We have a lot of inquiries, and in some instances we take a licensing fee. In others, we will allow it to be used for free,” Malkin explains. The income is a small fraction of the building’s revenue, he adds.

Meanwhile, the John Hancock Tower is slated to appear in a forthcoming Discovery Channel documentary on prominent buildings. Broadway Partners’ Yormack says, “It’s fun and interesting to own assets that have architectural significance.”

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