Frank Gehry’s Luxury New York City Skyscraper Has Everything—Except Enough Tenants

Nearly one-quarter of the units at the roughly 900-unit apartment building called New York by Gehry became vacant during the Covid pandemic, according to data company Trepp LLC. Apartments are now advertised with three months of free rent on 12-month leases.

Tenants renewing leases have negotiating power over the building’s owner, residents say. Romain Lacombe, a packaging company executive, said the rent for his corner one-bedroom apartment with prime skyline views went down to $3,600 from $4,900.

Less crowded common areas and faster elevators don’t hurt either. “It’s even better for us, living here with less people,” Mr. Lacombe said.

The tower’s struggles reflect a deepening crisis in the Manhattan real-estate market. The pandemic has led to an exodus of well-heeled young professionals to the suburbs and warmer, cheaper cities, leaving apartment landlords with rising vacancies.

Designed by star architect Frank Gehry, the tower’s wavy, metallic facade makes it one of the most recognizable buildings on the lower Manhattan skyline. When it opened in 2011 it was the tallest residential building in the Western Hemisphere.

Developer Bruce Ratner, who financed the project at 8 Spruce Street with tax-exempt bonds, outfitted the building with nearly every luxury imaginable and christened the finished product “New York by Gehry,” recalling a line of menswear or a perfume. A penthouse went on the market for $60,000 a month.

The tower’s opening helped kick off a luxury rental high-rise construction frenzy in lower Manhattan and Midtown over the past decade, as developers rushed to meet rising demand for apartments within walking distance to offices, bars and restaurants. Now many of the young professionals who once filled these towers have left Manhattan, and those who stuck around are no longer willing to pay sky-high rents.

The building’s owner is a venture of Brookfield Asset Management Inc., the Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, better known as TIAA, and a subsidiary of the National Electrical Benefit Fund, a pension fund.

While the crisis is driving down rents across Manhattan, New York by Gehry and newer high-rises like it have been hit particularly hard. One of its main selling points—a short distance to Wall Street offices—is far less appealing when many finance professionals are working from home. Its swimming pool, gym, and screening room once helped make up for small apartments, but the cost to use them isn’t included in the rent and they were closed or restricted access some of the past year.

The building’s vacancy rate surged to 26.25% in the third quarter, according to data firm Trepp. That is up from 0.9% in 2014, when the mortgage was issued, and well ahead of the Manhattan-wide vacancy rate of 6.14% as of October, according to Miller Samuel Real Estate Appraisers & Consultants.

“Occupancy at 8 Spruce has been on the rise, and we anticipate that accelerating dramatically in 2021,” a spokesman for Brookfield said in a statement. “Given the building’s ideal location for those that will be looking to walk to the office in Lower Manhattan, we think 8 Spruce will be among the more highly sought-after buildings in the city.”

Some tenants who stuck around the last few months say the building is noticeably quieter. Now, you might be the only person in the lobby that once bustled with people on their way to work, working out or walking their dogs. The gym is less crowded, which some consider a plus. Breakfast buffets on special occasions such as Halloween and Valentine’s Day have been replaced by pastries wrapped in plastic.

As the building began to feel empty this summer, management tried new things to engage with remaining residents, said Amlan Nanda, a travel technology executive who lives in a one-bedroom apartment at the tower. That included offering special activities. A company called “Luxury Attaché” has held Zoom events, Mr. Nanda said, such as wine tastings, a complimentary mixology class and the occasional free breakfast.

“It was a good experience, but I think maybe one of the reasons for that was that some people were moving out,” Mr. Nanda said.

Mr. Nanda said he had already signed a new lease in the early spring.

Amanda Mole, a pipe organist living on the 64th floor, said after Thanksgiving it felt like some of the old bustle was finally back. Suddenly there were long lines to pick up packages in the lobby, as boxes from Amazon kept pouring in. “The valet opened for extra hours. And on Sundays too,” Ms. Mole said.

Like many luxury rental buildings, 8 Spruce Street has historically been popular with renters from abroad, according to Beatriz Moitinho, a real-estate agent at Keller Williams NYC. Some clients of hers that she once helped move into the building have returned to their home countries during the pandemic, she said.

Fewer new arrivals of wealthy foreigners during the pandemic has meant less demand for luxury towers like this one. Annually, luxury home sales in Manhattan were down more than 20% in the fourth quarter of 2020, compared to the year-ago period, according to Miller Samuel, with high-end rental prices also seeing declines during the same period.

Remote work has also hurt the building’s retailers, which used to cater to tourists and office workers in the neighborhood. Alex D’Orlando, manager of a coffee shop on the building’s ground floor, now open for takeout, said he is getting fewer customers than in prior years. “There was a mass exodus pretty much once the summer started,” he said.

Write to Will Parker at [email protected] and Konrad Putzier at [email protected]