NEW YORK CITY-Given the dearth of new construction, the key is to make existing properties more competitive amid “one of the most challenging real estate markets in decades,” said Jack Nyman, director of the Steven L. Newman Real Estate Institute, as he set the stage for a seminar on doing just that.

Owners are seizing the moment when it comes to repositioning their office and multifamily assets, said panelist Marc Spector. Faced with a need to differentiate themselves in a tenant-friendly marketplace, they’re taking advantage of the drop in construction costs and starting the projects now, assuming that the financing is available.

To illustrate his point, Spector, a principal in architecture firm the Spector Group, cited a multitude of office and multifamily repositionings his company has helped move forward recently. He told his audience at the “Real Estate Repositioning: A Strategy for the New Economy” seminar that the architect’s role in these situations is to take an entrepreneurial approach in helping the owner maximize value. The seminar Wednesday was presented by the Newman Institute and the Greater New York Construction User Council.

A fellow architect, Thomas Vecchione of Gensler, put the tenant in the driver’s seat as far as repositioning is concerned. “Tenants are ultimately the catalyst for transformation,” said Vecchione, principal and design director with the firm. Great tenants respond to great buildings, he added.

Vecchione said the question prospective tenants ask, and which owners need to answer through their repositioning programs, is: how can your building take my business further? “It’s all about performance,” said Vecchione, who noted that owners also need to consider tenants’ need to do more with less space and the evolution of work styles. At this point, most corporate tenants are either developing or implementing a mobility program, for example.

Lastly, Vecchione stressed the importance of placing a building into context and to establish the property as a “flagship” of its environs. “It’s not about a singular building; it’s about a neighborhood,” he said.

On energy-efficiency retrofits—among the most widely pursued repositioning strategies—Jones Lang LaSalle’s Dana Robbins Schneider said her company gives clients both low-cost or no-cost options along with more costly ones. Northeast market lead for energy and sustainability services with JLL, Schneider said it begins with analyzing each property’s prospective tenants and representative recent leasing transactions, then identifying specific opportunities.

Energy efficiency, Schneider said, defines the new normal. Virtually new building is LEEED certified, and today, “for a building to have value, it has to be high-performing,” she said. Kenneth Block, parner with Tannenbaum Helpern Syracuse & Hirschtritt LLP and a regular contributor to the New York Law Journal, sister organization of GlobeSt.com, moderated the discussion as well as follow-up panels on implementation and incentives programs.

One of Schneider’s highest-profile clients delivered the keynote address, focusing on the $550-million repositioning of his company’s Empire State Building. Anthony Malkin, president of Malkin Holdings, said that with the piece of that repositioning program that has gotten the most attention—the green retrofit of the 79-year-old office icon at 350 Fifth Ave.—he’s been trying to take it out of the realm of “corporate responsibility” and “doing the right thing” into focusing on the economic argument.

“The carbon reduction comes along for free,” Malkin advised. “Govern yourself on your payback.” He added that one goal was to create a replicable model that other owners could follow. “If we only succeed at the Empire State Building, we have failed,” he said.

Taking a big bite out of the iconic property's $11-million annual energy bill is a component of a repositioning that has led to a number of full-floor tenants--a tenant class mostly unheard-of throughout the tower's history--and higher rents. When Malkin Holdings assumed control of 350 Fifth in 2006, rents were in the high $20s per square foot among the 560 tenants then based there. Today, with fewer and larger tenants in the roster, rents are escalating into the $40s.

Malkin said he steers clear of the term “green,” and pointed out that he’s learned it’s not synonymous with energy efficiency. “Green at the moment does not mean energy efficiency,” he said. “Green does not mean economic returns.”

Taking the steps to green a property should be manageable on a cost-neutral basis, said Malkin. It’s in energy efficiency that the real progress will be made. He warned that failure to achieve such efficiency would eventually be a liability in terms of refinancing or selling a property, let alone in leasing out space to increasingly savvy tenants.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.