By Kelly Dickerson
It’s bizarre to think that one building can take in millions of dollars in revenue with just one tenant.
The building at 1 Times Sq. is home to a Walgreens that occupies the first three floors, but from the fourth floor to the 25th floor, giant flashing advertisements stretch up the side of the building. It’s now less of a building and more of a high-rise billboard. The only regular visitors to the upper floors of the building are a maintenance crew that periodically cleans the inside, and the New Year’s Eve ball drop team that oversees the famous drop of the 12,000-pound Waterford Crystal Ball before a worldwide audience of 1 billion people.
Lehman Brothers bought the property in 1995 at a steal for $27 million, according to the New York City Department of Buildings. The inside of the building hadn’t been renovated since the 1960s, when the previous owners stripped the inside down to its bare essentials. Lehman Brothers saw potential in the building not for rent revenue, but as a way to capitalize on the building’s prime location. The company erected a grid frame on the outside of the building and began selling ads. When Jamestown Properties took over 1 Times Sq. in 1997, the building was not up to code standards. Replacing the heating and cooling, wiring, and ventilation would have been extremely costly, said Sandra Hurtado, a communication correspondent from Jamestown Properties. The irregular floor plan also makes it unsuitable as an office space.
“The building is triangular,” said Lynne Sagalyn, professor of real estate at Columbia University and author of “Times Square Roulette: Remaking the City Icon.” “It’s just not made for office space.”
And advertisement is all the revenue 1 Times Sq. needs: the building is valued at over $400 million and has seven advertisements on it, according to the New York City Department of Buildings. As of 2012, the owners of the building said it brings in $23 million of advertising revenue each year. The ad revenue is 85 percent of the building’s total annual revenue, and the remaining 15 percent comes from Walgreens’ rent. Companies are willing to pay a lot for their advertisement to be seen by the over 100 million people that pass through Times Square annually, according to a spokesman for Sherwood Outdoor, an advertising company responsible for securing some of the prime spots in Times Square. Their advertisements often make appearances in TV shows and films that include what has come to be known as the iconic Times Square shot.
The center of Times Square is prime real estate, and Jamestown Properties could make a huge profit renting it out to additional tenants. Rents in surrounding buildings cost upwards of $1,500 a square foot, according to the Times Square Agency. But the problem, other than the enormous renovation cost and irregular floor plan, is filling a building with absolutely no windows. The windows are completely blocked out by advertisements.
The building has a complicated history that led to its conversion into an advertising tower. It was originally built in 1904 to house The New York Times. The company only spent about 10 years in the building, but it started the New Year’s ball drop tradition and made Times Square the official gathering place for ringing in the New Year. The Times left in 1913, but still maintained ownership of the building. The newspaper set up a news ticker in the 1920s that displayed major news headlines of the day. The ticker, locally known as the “zipper,” consisted of thousands of lightbulbs and a conveyor belt to move type. The first headline it displayed announced Herbert Hoover’s victory in the 1928 presidential election.
In the 1930s, Times Square started on a downward spiral and became a hotbed of criminal activity, said Sagalyn. One Times Sq. even had a full-blown speakeasy operating in the basement during the prohibition era. In the 1960s, the Allied Chemical Corporation bought the building from the Times and attempted to make it a tourist attraction. They completed an extensive $10 million renovation of the outside of the building and released a series of ads designed to paint the building as an iconic symbol of New York. But by that time Times Square already had a “seedy reputation,” said Sagalyn. It was the site of many drug deals and home turf to streetwalkers.
The building changed hands several times over the next couple decades and no company that owned the building leased it out to tenants. In 1996, the first billboard that went up on 1 Times Sq. was a Cup Noodles advertisement with jets that squirted out steam. Many companies soon followed suit and some of today’s ads stand over five stories tall. Many people, including lifelong New Yorkers, don’t realize that many of these buildings are mostly vacant. “There’s no one in there? Are you kidding?” said construction worker Anthony Borden, 34. “What a f—ing waste.”
Kelly Dickerson is a freelance journalist based in New York City. You can find more of her work at kellydickerson.me.