Trends and Development Shaping the Future of the Fashion District

There are a variety of forces at work in and around the Fashion District that will have an impact on the neighborhood’s evolution. These forces include:

• Continued erosion of the city's apparel manufacturing sector;


• Recovery and further expansion of office-based industries;


• Growing importance of creative industries in the New York City economy;


• Strong demand for housing; and


• Ongoing development projects including transportation, commercial and retail developments

Continued Erosion of the City's Apparel Manufacturing Sector

The fundamental shift in the structure of the fashion industry shows no signs of reversing, and thus the prospect for continued decline in employment among apparel manufacturers seems assured. No longer competitive in mass production, New York City’s manufacturers receive business primarily for higher-end production orders, sample production, specialty products, products requiring "quick turn around", short run orders, and re-orders - important services to be sure, but ones lacking sufficient demand to sustain the levels of employment once seen in the City’s apparel manufacturing sector.

Chart 9
Observed and Projected Future Employment Among Apparel Manufacturers in New York City, 1988 - 2010

The chart above illustrates the steady decline in employment among apparel manufacturers seen in New York City since 1988. If these historic decline rates were to be carried forward, by 2010 apparel manufacturing employment in the City would be just above 17,000 -- less than half of what it is today. While this decline may be softened by efforts to bolster demand for the services in which New York City producers specialize, a continued drop in employment is almost assured.

Chart 9 is not a forecast; rather it is just a mathematical projection into the future of trends from the past dozen years. Nevertheless, there are emerging factors in the local, national and global marketplaces that suggest that apparel production in New York City will continue to decline.

Since 1999, the volume of imported apparel has grown at five times the rate of consumption, squeezing out US-made products. In addition, developments in U.S. trade relationships with countries where production costs are lower (including those cited below) suggest that imports will continue to increase their share of the overall U.S. apparel market.

• Congress has amended the legislation authorizing the Caribbean Basin Initiative in order to give Caribbean nations access to the U.S. market comparable to that enjoyed by Mexico under NAFTA.


• Congress has also extended trade preference to the nations of Sub-Saharan Africa.


• Under the Uruguay Round agreement, quotas on textile products and apparel that had been authorized under the Multi-Fiber Agreement are to be eliminated on December 31, 2004.


• Since Congress reinstated presidential Trade Promotion Authority, the U.S. Trade Representative has been negotiating free trade agreements with Chile, Singapore, and the nations of Central America and southern Africa. Those and other bilateral or regional agreements will continue to expand low-cost producers’ access to U.S. markets.

The continued negative pressure on the domestic and local manufacturing industries suggests an associated decline in the demand for space among apparel manufacturers in New York City. Indeed, the amount of space occupied by apparel-related businesses appears to have dropped off considerably since the Special Garment Center District was created in the late 1980s. A report prepared for the City Planning Commission by Louis Harris Associates in 1986 indicated that there were 8 million SF of space occupied by apparel manufacturers in the neighborhood of the Fashion District; by 2002, Identity Map discovered just 3 million SF of space in use by firms producing apparel within the boundaries of the BID. If the decline in employment among apparel manufacturers is likely to continue, it seems equally certain that the amount of space required by apparel manufacturers will also continue to decline. This fact has serious implications for the positioning of future policy to encourage economic development within the Fashion District.

Continued Growth in Demand for Office Space

Despite the current demand conditions in the market today, the long-term need to increase the supply of commercial office space in New York City has been acknowledged in a variety of studies and analyses. In June 2001 the Group of 35, a blue-ribbon task force convened by Senator Charles Schumer, established both the potential for strong long-term growth in the City’s office based industries and the corresponding demand for new office stock to accommodate that growth. The Group of 35 found that:

Half the projected employment growth [in New York City] for the next 20 years will be found among office-based companies. To accommodate growth in the office sector, the City will need to add approximately 60 million square feet of office space by 2020. Without this new space, New York City will lose thousands of jobs and the economic activity they will generate.

In a report commissioned by the Civic Alliance to Rebuild Downtown New York, economist Hugh Kelly similarly highlights the need for additional office space.

The tone of the Group of 35 report, while acknowledging the inevitability of economic and property market cycles, is confident about New York City’s long-term economic prospects. Post-9/11, its outlook seems exuberant. Yet its fundamental argument, namely that New York City’s economic health depends on its ability to nurture, diversify and grow its key office-using industries, and that in turn means developing an adequate volume of modern office facilities at competitive prices, can hardly be gainsaid. The destruction of the World Trade Center, and the extensive damage to surrounding properties (perhaps ultimately requiring the demolition of some buildings such as 130 Liberty Street), if anything underscores the issue of supply-side sufficiency once the economic cycle turns upward again....

Unless one is willing to forecast the permanent eclipse of growth in Manhattan's office industries, the conclusion of the Schumer Group of 35 appears to remain sound, namely that this office market will require substantial volumes of construction over the coming two decades.

These two reports echo the discussions of planners, economists and real estate market observers - that New York City’s economic future is based on the continued expansion of industries that require office space, and furthermore, an ability to maximize that economic future is reliant upon the market’s ability to provide the necessary office space.

Several existing analyses predict strong growth trends in the office-based sector’s of the New York City economy:

• The Group of 35 projected an increase of 300,000 office-based jobs in New York City between 2000 and 2020.


• Barbara Byrne Denham of The New York STAT, a long-time observer of the City’s office based industries and its office space market, characterizes estimates of a 1.0 percent average annual increase in office-based employment as a "safe" assumption for the next 20 years.


• In its analysis of the demand for office space in Lower Manhattan (prepared for the Port Authority of New York & New Jersey and the Lower Manhattan development Corporation), Urbanomics offers a somewhat more conservative forecast, projecting an increase of approximately 200,000 in office-based employment in Manhattan through 2025.


• Economy.com projects average annual growth in total payroll employment in the New York City PMSA of 1.1 percent between 2002 and 2010.

Such strong growth in office-based employment will trigger significant increases in the demand for office space in the City, or elsewhere in the region if suitable space cannot be provided within the New York City market. While there are significant opportunities for new office development at sites throughout New York City - including a handful of choice sites in Midtown, the World Trade Center site and surrounding sites in Lower Manhattan, and the Hudson Yards area on the Far West Side - these new construction projects will not serve the needs of all those looking for office space in the City. Smaller tenants who either do not want or cannot afford to rent space in existing or newly developed class A office buildings will instead seek out quality, lower-cost space, ideally located in neighborhoods with amenities and nearby transportation access.

Properties in the Fashion District, with access to superior transportation networks and proximity to the midtown core, will be well-positioned to capture this unique segment of growing demand. With neighborhood upgrades and amendments to current use restrictions, the Fashion District neighborhood will be poised to benefit from the future growth of small and mid-sized entrepreneurial firms in the next business cycle.

Growing Importance of Creative Industries in the New York City Economy

As the employment data demonstrated, a number of "creative" industries are growing in importance in the New York City economy. This is good news for the future of the Fashion District, which is already the home of one of the City’s most identifiable "creative" industries - fashion design. While certain functions within the fashion industry, including production and warehousing, will almost certainly face ongoing pressure to relocate to lower cost locations, the design and marketing segments of the industry will likely fair better in terms of maintaining a presence in the Fashion District. This presence can be a strong asset for the neighborhood, serving as an anchor to attract other creatively oriented industries. In fact, many of these industries are already gaining a foothold here - film / visual arts / photo studios, advertising / marketing / graphic design, internet / network based, architectural design, music, non-profit theaters and cultural organizations, and magazine / book publishing all have significant representations already among the tenants of the Fashion District. In many cases, these firms tend to be small and attract an employment base that looks for a more unusual physical environment - one that contrasts with the new class A office buildings that attract many financial service and business service firms. Thus, with many lofts and underutilized warehouses, the Fashion District has a potential advantage in attracting these tenants as the City's economy emerges from the current economic slump.

Strong Demand for Housing

As the earlier residential market analysis demonstrated, the demand for housing remains strong in Manhattan. While there has been residential development activity on the periphery of the Fashion District, the existing zoning has for the most part prohibited the conversion to and development of housing units in the district. The building conditions analysis highlighted the many opportunities to generate new housing on the blocks between Eighth and Ninth Avenues. If the zoning were changed to permit housing to intermingle with the commercial and manufacturing uses that are ongoing on those blocks, it is very likely that other complementary uses including restaurants and retail would spring up as well. These additions to the mix of activity in the area would help enliven the neighborhood and invigorate the non-residential areas of the Fashion District.

Impact of Development of Adjoining Areas

Numerous office, retail and transit projects are slated for development in Midtown Manhattan. These developments offer the possibility of spurring additional investment and economic activity in the areas that surround them, including the Fashion District. The most notable projects are described briefly below.

• Penn Station Redevelopment (transit & retail) The 1.4 million SF James A. Farley U.S. Post office building at 33rd Street and Eighth Avenue is slated for conversion to a new transit facility for Long Island Railroad and Amtrak train service. The project also calls for a total of 700,000 SF of new retail space and will also include a deal with a private developer to develop 805,000 SF of air rights. The project is expected to be completed within the next 5 years.


• No. 7 Subway Extension (transit) In connection with New York City's bid as a finalist to host the 2012 Summer Olympic Games, the MTA intends to extend the No. 7 Subway line west from Times Square to the Port Authority Bus Terminal on Eighth Avenue, then south to the new Penn Station and onward west to a future development above the Hudson Yards. This extension, along with contemplated revisions to the zoning code on the west side of Manhattan, will dramatically affect the redevelopment potential of this community.


• Port Authority Bus Terminal (office & retail) The air rights above the north tower of the Port Authority Bus Terminal at the southwest corner of 42nd Street and Eighth Avenue are being leased on a long-term basis from the Port Authority of New York & New Jersey to a private developer. The development is to contain in excess of 1 million SF of new office space and will entail the renovation / relocation of the existing retail space along with infrastructure improvements to the transit facilities. The project will begin once an anchor tenant has been secured.


• New York Times (office) The New York Times Company plans to build a new headquarters on the east side of Eighth Avenue between 40th and 41st Streets. They will own and occupy approximately 700,000 square feet and anticipate opening in 2005. In addition to the headquarters, the New York Times’ development partner, Forest City Ratner Co., intends to develop a 600,000 SF speculative office project on the upper floors of the same building. The State gained control of the site in late 2002 through condemnation and is expected to transfer the property to the developer in the near future.


• 7 Times Square Tower (office & retail) This project is currently under construction and anticipated for completion in May 2004. At commencement of construction, the accounting firm Arthur Andersen was the anchor tenant for the project. However, Arthur Andersen subsequently withdrew from the deal, as did a major law firm that was negotiating to replace Andersen, leaving the project as a speculative development. The project is to contain 1.13 million SF of office space and 66,815 SF of retail space.

These projects have the potential to draw thousands of new commuters, office workers and shoppers to the areas immediately surrounding the Fashion District. The transit improvements will also enhance what is already a highly accessible area, and will surely increase the draw of tenants to the areas west of the Fashion District. With the vitality of Times Square to the north, and the prospect of dramatic improvements to the west, the Fashion District now sits at the crossroads of vast new development activity and public investments. The district is ideally positioned to transform itself into a more diverse and dynamic neighborhood. However, the positive spillover that the surrounding development projects offer will likely bypass the Fashion District unless the City adopts a progressive economic strategy for the area and amends the current restrictive zoning scheme.

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