Midtown’s Decoration & Design Building Sees Drop in Occupancy

By: Hadassa Kalatizadeh

Midtown Manhattan’s Decoration & Design Building is facing a more than $30 million loss as occupancy declines. As reported by Crain’s NY, landlord Charles Cohen is grappling with the drop in occupancy at the building. The 18-story building, situated across from Bloomingdale’s and Home Depot at the corner of Third Avenue and East 58th Street, boasts 600,000 square-feet which hosts a wide private market featuring dozens of vendors serving interior designers. The D&D Building is far from another regular city building.

The rooms are each custom decorated in a bid to impress the interior designers who come to shop for clients. One showroom features a shimmering wall sculpture similar to the backdrop of Gustav Klimt’s “The Woman in Gold.” Another room at the building features club chairs covered in paint-splattered jacquard, a fabric patented in France in 1804.

Per Crain’s, however, despite its allure, the D&D building has seen a decline in tenants in recent years. In 2015, the building had 130 tenants. About a third of them have exited in recent years—leaving the net cash flow to also fall by a similar amount.

So much so, that the building has been delinquent on its mortgage since May 2023, and lenders may need to write off $34 million of the $156 million loan balance, bond-rating firm KBRA announced in a new report. The report added that about one-fifth of the building’s tenants have leases that are month-to-month or that are scheduled to expire in 2024. Stark Carpet, D&D’s largest tenant, which has 37,000 square feet of space at the building, also has a lease that is slated to expire in 2024. Stark didn’t reply to Crain’s request for comment.

While occupancy falls and revenue drops as a direct consequence, costs have been going up. The landlord owns the D&D Building— but not the land itself, and so the ground rent rose close to double last year, up to $6 million. That rent is slated to continue its upward trend at an average rate of roughly 4% annually. City records show the ground lease is owned at least in part by the Rice Foundation, a non-profit founded by real-estate broker Henry Hart Rice.

Reps at Cohen Brothers Realty did not reply to Crain’s requests for comment.

The D&D building was developed in 1965, and was purchased by Charles Cohen in 1996 for $70 million. For a long time the building was quite profitable with its niche market, raking in approximately $23 million a year in net cash flow. Maintenance and upkeep at the building was rarely a big investment for the landlord, as the tenants on most floors preferred to build out their own spaces. The showrooms are a place for design-industry professionals to examine new work and negotiate deals away from the eyes of the general public, with most tenants refusing to do business with anyone who doesn’t have an account.

The pandemic put a halt on the building’s live events and awards ceremonies though, which took away a good deal of the building’s allure. Still, the D&D remains a place where designers and showroom staff forge lasting ties. “It’s become a second office in a sense for me,” Westchester County-based designer Lara Michelle wrote in her article “Demystifying the D&D Building”. “With such a concentrated amount of the world’s best products in one building, there is no other place in the area like it.”