Skyscrapers Spur Eye-Opening Business


The view from the observation platform at 30 Hudson Yards, a 1,296-foot office building being developed on the west side of Manhattan. Related Cos. plans to open the deck in 2020.

The stakes have never been higher in the competition for the best skyscraper view of New York City.
 Observation decks atop Manhattan's World Trade Center, Rockefeller Center and the Empire State Building offer sweeping panoramas that stretch for miles. The three viewing platforms, which stand at 850 feet or higher, attract more than nine million visitors combined each year. At around $30 a head, that comes to about $270 million in annual revenue before adding money made from food, beverage and souvenirs.
 Now, two more developers are preparing to offer their own vistas. Related Cos. plans to open an observation deck in 2020 atop a 1,296-foot tower in its sprawling Hudson Yards development. The following year, SL Green Realty Corp. is scheduled to open an attraction at One Vanderbilt, the 1,401-foot office tower currently under construction next to Grand Central Terminal.
 “We believe there is an incredible latent demand for the observation experience in the New York tourism market,” said Robert Schiffer, a managing director at SL Green.
 Skyscraper developers have realized that selling great views can be as profitable— and sometimes more profitable — than the offices, apartments or other space they sell on the floors below.
 The World Federation of Great Towers a decade ago had fewer than 30 members, according to Jean-Yves Ghazi, a member of the executive committee of the observationdeck organization. Today, there are more than 50 members, he said.
 New observation platforms have opened in Los Angeles and London in recent years. Another is being planned in Miami. Saudi Arabia is constructing the Jeddah Tower, the world's first kilometer (3,281 feet) tall building with an observation platform that will enable visitors to see beyond Mecca, about 55 miles away.  

Observation decks can add more than $100 million to a building's cost.  

These tourist attractions don't always live up to such high expectations. Executives involved in the World Trade Center attraction predicted they would draw more than three million visitors a year, but its attendance today is in the 2.5 million range.
 “If you have 75 million visitors per year to New York, how many of them will go to more than one?” asked Eric Deutsch, a consultant in the observation-deck industry.
 Observation decks also don't come cheap. They can add more than $100 million to a building's cost, partly because dedicated elevators and entrances have to be included, Mr. Deutsch said.
 For years, most skyscraper owners would use the top floor of their buildings not for general public use but as private venues.
 More recently, however, public observation decks have enjoyed a resurgence. In 2005, Tishman Speyer reopened the three-level deck atop 30 Rockefeller Plaza.
 Profitability also was often hard to gauge until 2011, when the company that owned the Empire State Building filed with the Securities and Exchange Commission as part of an initial public offering. The filings showed that the tower's observation deck made more money than its office space.
 Last year, the Empire State Building observatory produced $127.1 million in revenue or about 40.4% of the building's total, according to Empire State Realty Trust.
 “For most people, that was a bit of a revelation,” said Jay Cross, Related's president of the Hudson Yards project.
 As more developers pile into the observation-deck business, an arms race has developed among competitors over who can offer better amenities. The days of decks simply offering breathtaking views and a few coin-operated binoculars are over.
 At the World Trade Center, the elevator ride to the deck offers a panoramic experience that takes riders through 500 years of New York history. On the way down, the elevator simulates a ride outside of the building.
 In August, the Empire State Building opened a new entrance in an effort to make the ticketing and waiting-in-line process more efficient, spacious and educational. New features include a grand staircase, 25-foot model of the building and historic photos of the landmark. Empire State Realty Trust is planning additional upgrades as part of a more than $150 million investment that will be completed in 2019, said Anthony Malkin, the chief executive. He said new features will be in keeping with the romance and history of the building.

BY PETER GRANT

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