Can the Garment Center Be Saved?

New York designers are fighting for a way of life, but the odds are against them.

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New York designers are fighting for a way of life — but the odds are against them.

This story first appeared in the September 8, 2008 issue of WWD.  Subscribe Today.

The cause? Preserving the Garment District around Seventh Avenue.

Mom-and-pop businesses, some of which have occupied the neighborhood for generations, are being elbowed out due to skyrocketing rents, and could very well be replaced by offices, condos, retail chains and restaurants. What stands to fall by the wayside are the sample makers, short-run manufacturers, button stores, fabric shops and pattern makers that have been the unheralded underpinnings of the American fashion industry for decades.

“I am really sad and really worried,” said Nanette Lepore, who makes the bulk of her goods domestically. “There seems to be no regard for the industry’s history, culture and trade. It’s all about the guys with the money wanting to invest and put in chain restaurants like Olive Garden and TGIFs that you can find in Boardman, Ohio, a small town in Connecticut or anywhere else in the country.”

The battle over the Garment District crystallizes issues being played out across American industry and cities, highlighted in this presidential election year. Can companies manufacture domestically and remain competitive against low-wage countries like China and India? Should local, state and national governments encourage firms to produce in the U.S. with tax breaks and other credits? How can the industry attract young people to work in factories rather than offices? And how much gentrification is too much?

The latter issue has been an ongoing debate in Manhattan almost since the city was called New Amsterdam, affecting neighborhoods from Little Italy to Chinatown, Greenwich Village to Times Square. In the end, “old” neighborhoods gave way to, if not necessarily better, certainly different ones and the former denizens found other areas to live or work in — until they, too, were gentrified.

Now it’s the Garment District’s turn. The area’s side streets are zoned for manufacturing, yet demand in the ever-shrinking domestic sector far lags the supply of space. As a result, some landlords have illegally begun renting the spaces for offices and other nonapparel manufacturing use.

While past mayors were outspoken in their defense of the district and its manufacturing history, the businessman-turned-Mayor Michael Bloomberg has been more subdued. Proclaiming support for manufacturing in New York on the one hand, the mayor’s office has been debating the future of the Garment District almost since Bloomberg took office in 2002 — with no resolution in sight. The sense among some designers and tenants in the Garment District is that Bloomberg’s administration, which is in its final stretch, is ambivalent about whether manufacturing remains in the area and would be just as happy if the companies there moved to other neighborhoods, like Long Island City or Brooklyn. Others, though, claim Bloomberg is keen to find a solution.

There is said to be some 1 million square feet in the Garment District being used by apparel manufacturing factories, a sliver of the area’s total 10 million square feet, according to Identity Map Co., which surveys businesses in the district. Depending on whom you ask, preserving anywhere from 250,000 to 500,000 square feet is seen as an acceptable compromise by the fashion industry and the city. City officials declined to comment on specific numbers.

Asked about where things stand in the ongoing debate over the Garment District, the Mayor’s spokesman deferred to the Economic Development Corp. Patrick Murphy, head of fashion and retail growth initiatives at the EDC, said, “We continue to work aggressively on a solution that ensures that New York City remains the fashion capital of the world, while meeting the needs of the garment center, property owners and other industry stakeholders. It is a difficult balancing act, but we are committed to finding a workable solution. We are in active conversations and are optimistic that a consensus will be reached.”

The latest step in the long drawn-out process will come this week. On Monday, several board members from the Fashion Center Business Improvement District will meet with executives from the EDC. The next day, the Council of Fashion Designers of America’s executive director Steven Kolb, and Yeohlee Teng, who has been instrumental in leading the charge to preserve the industry’s foothold in the area, will make the trip to City Hall. The meetings will be the first in several months.

Designers hope to turn up the heat this week. Marc Jacobs, Vera Wang, Ralph Lauren, Michael Kors, Narciso Rodriguez, Phillip Lim, Nicole Miller, Nanette Lepore and Maria Cornejo are among the 25 designers who have purchased Save the Garment Center T-shirts for themselves, their staffers and show guests. “Several thousand” have already been made, according to Anna Sui, who spearheaded the effort. And Bill Blass LLC has bought a bundle to give to students from the Fashion Institute of Technology, Pratt and Parsons The New School for Design to wear to the shows.

“So many designers are really on board with this and are so happy that somebody is trying to make a statement,” Sui said. “When I was reading the stories [about the issue], ‘Something needs to be done’ was always in the back of my mind. I finally put my foot down and said, ‘Let’s do something.’”

Lepore plans to take her final bow in a Save the Garment Center T-shirt, and show staffers will also wear them. Having turned a $5,000 loan into a $120 million business, she has arranged for Scott Stringer, Manhattan borough president, to tour the factories she uses and has been filmed for a forthcoming HBO documentary about the loss of manufacturing in America.

Lepore is proud of the fact she employs 120 people with health care, benefits, a 401(k) and annual raises, in addition to the 10 factories and four cutting rooms she uses. And all those workers spend money in the neighborhood, she said. But finances aside, there is something greater at risk. “I’ve never been a flag waver, but there doesn’t seem to be the respect for handmade products as a skill,” she said. “Being someone who started her company with nothing in my East Village apartment, if I had to get on the phone and find some factory in China, it wouldn’t have happened,” Lepore said.

While most agree the definition of fashion has evolved from one that was all about manufacturing to one that thrives on public relations and marketing, there is still a need to salvage some of the Garment Center. Diane von Furstenberg, president of the CFDA, said, “I think the best scenario is to protect and see what we can do short-term and long-term. The truth is, as the industry expands, it’s so important to work with the city and see what we can do for a five-year, 10-year plan. And if we really want to maintain manufacturing in New York, we should.”

Added Teng, who makes “virtually everything” for her collections in New York, “Fashion week is upon us and a lot of houses — high or low, big or small — depend on what is available locally to get their collections done. If they think of a color they need to inject into their collections at the last minute or they need another 20 samples, they can find it just in time.”

“Being able to do that helps them stay on top of their game. If we are touting ourselves as the fashion capital of the world, we need to be able to do that.

“I would hate for New York to become a one-note town — Wall Street. I don’t have anything against Wall Street, but I would miss the opportunity to see people at work, making things with their hands,” she said. “People need to get passionate and excited about having this dimension around and not just being shipped off now.”

Teng also voiced concern about how a stymied fashion district would affect the next generation of American designers, as did Rag & Bone co-founder Marcus Wainwright. “People need to realize that Parsons and FIT are funneling all these designers into New York,” he said. “And part of the reason they are staying is they can walk across the street to a button shop or to a pattern maker. They can start a business here. You can’t do that anywhere else in America except California and that is mostly T-shirts and jeans.”

Wainwright recalled trekking from one factory to the next looking for pattern makers, sample makers and all the rest in his company’s early days. “The long and short of it is, if I can’t make clothes here, all the jobs I currently support will go to China, which is the whole problem with the American economy. And I’m English,” he said. “All these women who have been sewing all their lives will have to go to work at Wal-Mart and that will be the end of that craftsmanship. It’s happened in all these places, with Scottish cashmere, Irish shirts and English shoes. You lose it forever. You get a better price for a cheaper product.”

But the industry is battling against the tide, as the number of jobs in New York’s garment industry continue to shrink. In 1987, to try to stem the number of production jobs heading overseas, Mayor Edward Koch’s administration approved the Special Garment Overlay, which effectively secured 10 million square feet of space as incentive for domestic apparel companies. There are about 1 million square feet being actually used for manufacturing, and preserving around 350,000 square feet has been discussed with city officials, according to FCBID.

Now city officials, landlords, real estate developers and bankers are said to be lobbying to free up some of that 10 million square feet for higher-paying tenants or buyers. Some singled out Renzo Piano’s skyscraper for The New York Times as one of the buildings that is driving up rental space to $75 per square foot. Last month, the Mary McFadden Building at 240 West 35th Street was sold for $58 million, or nearly $359 per square foot, to Hidrock Realty, which has already leased the 17-story building, including three street-level retail spaces.

Last year, according to the most recent statistics available from the New York State Department of Labor, there were 17,613 manufacturing jobs in the Garment District, compared with 18,158 in 2006. In 2007, there were 59,035 industry jobs in the five boroughs, versus 60,526 in 2006. In the industry’s heyday in 1950, there were 369,000 textiles and manufacturing jobs. FCBID’s executive director Barbara Randall said she doesn’t have an inkling about what the city plans to discuss this week.

“We’re hoping there is some sort of proposal that includes preserving the space required to accommodate today’s fashion industry. Our concern isn’t about zoning changes, we’re just afraid if something doesn’t happen in this administration, it is never going to happen,” she said. “Using zoning as a tool to preserve manufacturing in New York City did not work. We would look for a more meaningful tool that included preserving the space required to support today’s designers.”

Long Island City and Brooklyn, two areas with ample industrial space, are options. Creating clusters of production in either place, or anywhere else in the region that has the room, could be attractive, especially if “corridors of transportation” are set up to expedite the commute, Kolb said. “Irrespective of any designer who wants to keep production in the U.S., I’m sure they’d rather keep production in Long Island City than get on a plane to India,” Kolb said.

Kolb “loved” the idea of conversions credits, which would allow Garment District landlords to make a payment to a trust, a fund or perhaps another agency to opt out of the zoning restrictions regarding manufacturing. Conversely, another option might be to offer subsidies to landlords who commit to apparel manufacturing on a long-term basis. “It’s appropriate that during fashion week, we will be talking about the future and preservation of the Garment District in New York. The irony is that fashion week is all about New York,” Kolb said. “The challenge for me is getting word back from the city about what the active plan is.”

When the theater district was rezoned eight or nine years ago, certain landlords were able to sell unused development rights to allow for broader use — as in skyward, according to Michael Slattery, senior vice president of the New York Real Estate Board. But there, the garment center’s zoning is much more restricted, especially on midblocks, he said.

Restore Clothing co-founder Anthony Lilore rounded up signatures for a petition last year, after suppliers and cutting rooms his company had used for years were displaced. “The landlords nearly tripled the rent when the lease was up. How do you possibly stay in business?” he said. “A lot of the floors were just vacant. Landlords would not renew the lease and let the place stay dormant until they could rent it for significantly more money.”

But the boroughs are not the answer for him. “Let’s face it, kids don’t come to New York City to get involved in the fashion industry, to work in Long Island City. They don’t point to a building in Long Island City and say, ‘That’s where ‘Project Runway’ was.’ It’s right here on Seventh Avenue and 40th Street,” he said. “The beauty of this neighborhood is that it’s such a concentrated supply and labor network that even if Ralph Lauren, Donna Karan and Calvin Klein get some of their samples from Italy, they get here and sometimes still have to be altered. By allowing these people to move to other parts of the city, your support network disappears.”

Stan Herman, the previous CFDA president who was involved with the original zoning laws in the Eighties, and is still at it, said the Garment District’s unpolished image is driving designers to Chelsea or the Meatpacking District. “One of the problems is that many find it’s not a cool place to be,” Herman said. “There should be somebody appointed from the mayor’s office or our own to give a sheen to the center, so that people move back. If you had major designers, young designers and hot designers in tow, you could retain a demi garment district,” and one with a designated venue to preserve manufacturing.

“It’s a money factor,” Herman said. “The height and width of Manhattan is finite. Every time there is gentrification, it kills the original core. The city in itself has to help out. It’s not fair to ask somebody to take $20 a square foot when they could get $80. There have to be certain tax abatements to make this viable.”

The outer boroughs could be a good alternative, said Dennis Basso, whose fur and ready-to-wear factory and design offices are based in a 30,000-square-foot Long Island City space. And the commute there from his Madison Avenue store is faster than the one to his old West 29th Street offices. “On the outskirts of Paris or Milan, this is often a very common scenario, where the offices are outside the city,” he said.

Other designers agree. Costume jeweler Alexis Bittar is one of those companies keeping production in-house, which, until 2002, was located on 38th Street and Eighth Avenue. “My lease was up at that space and they were going to double the rent,” said Bittar of his decision to move to Brooklyn, where he employs 120 people. “I found out about this program called REAP [Relocation and Employment Assistance] that was run by the city and it paid businesses to relocate from Manhattan to different areas, one of which was DUMBO.”

Bittar’s realtor clued him in about REAP. “It gave you an incentive per employee for five years,” said Bittar. “It was great. It was one of the smartest things I’ve done.”

Back in Manhattan, where commercial real estate is at a premium, interest in the Garment District has increased and retail rental rates have shot up to $175 or $200 per square foot — a 20 percent gain compared with last year, said Joanne Podell, a retail broker at Cushman & Wakefield. The area is now known as “Times Square South,” she said, adding that steady foot traffic and robust tourism have helped drive up prices, but only local merchants and service industries have entered the area, not national chains.

The city has tried to spruce up the area with the Broadway Esplanade, a seven-block stretch that includes a bike lane, tables, chairs, benches and planters and runs along the east side of Broadway from 35th to 42nd Streets. The $700 million project required reducing the street’s four traffic lanes to two, and subsequently slowing down traffic. On Friday, Mayor Bloomberg held a press conference touting Broadway Esplanade and other newly christened plazas.

But even as landlords fight to free up space in the district for more offices, the forecast isn’t that rosy. Steven Kaufman, president of the Kaufman Organization, which owns or manages 15 buildings in the Garment District, said office rental rates have been slightly off, due to the general economic malaise. The average going rate is “in the mid-30s,” compared with last year’s average of $36.46 per square foot. Tenants coming off 10-year leases or longer are the ones facing sticker shock, he said. And while residential towers are rising up on side streets west of Eighth Avenue, Kaufman said that is not his firm’s end game.

“We’re not asking for the right to convert into residential properties,” he said. “We’re asking people to recognize the reality that manufacturing has left the city, and the country as a whole. To have a zoning law that mandates renting to manufacturers that don’t exist anymore doesn’t make any sense…showrooms are going to continue. They have actually increased.”

But some argued that it’s the factory workers and sample and pattern makers — many of whom have worked in front of the same sewing machines for decades — who will face the fallout. Craig Hoffman, president of Bill Blass LLC, said, “Bill Blass has a history and legacy tied to the Garment Center. We have people working here who couldn’t possibly be replaced in 100 years. There are people who have been making samples by hand for the company for 32 years,” he said. “You can’t possibly replace them, and there aren’t any young people coming down the pike with those skills.

“It’s an older business model. But it’s a business model that’s needed for creating luxury products and luxury goods,” he said.

Standing beneath a red, white and blue bow that decorates his office door at R&C Apparel Corp. at 344 West 38th Street, Ramdat Harihar, president and chief executive officer, said, “This is the heart of the industry,” as he surveyed 26 workers at work. R&C, which does special handwork for 100 companies, including Anna Sui, Vera Wang, Zac Posen, Lepore and others, faced a 5 percent rent increase this year. Relocating to another building was an unwanted headache, since it would cost $20,000 just to move the boiler that is needed to fire up the machine used for hand-pleating. So Harihar scaled back his space from an entire floor of 8,000 square feet to 4,500 square feet. Hundreds of old machines are piled up in the already cramped work space, as well as in his office. His landlord told him he planned to use the leftover space for storage, “but it’s still empty,” Harihar said.

During a visit last month, one staffer was hand-sewing scraps of fabric together to make belt loops instead of using uncut pieces on an automatic sewing machine. “We have to help him out. He doesn’t have enough fabric,” Harihar said, referring to the client.

He also feels obliged to give up-and-comers a helping hand. “Young designers need a lot of assistance to be better designers or production managers. A lot of them are willing to stay here because the quality is so different,” he said. “I have been encouraging them to go and use the Made in New York or Made in the USA label.”

When New Dynasty owner Amy Koo’s rent jumped 50 percent this year, she still renewed her lease at 307 West 38th Street, even though a 7 percent increase had been the norm in recent years. But she inked a two-year lease to avoid another hike next year. Had she asked why there was such a drastic increase? “I didn’t say anything. [You don’t], if you want to continue.”

She and her 30-person staff are “working harder,” and are taking on more overtime to try to offset the cost. Lepore, whom she first started making clothes for 18 years ago, is trying to help New Dynasty by paying a little more per garment on second runs, Koo said.

Encouraging small designers or new ones to do small runs in her factory is one tactic. “I’m trying to get them to do their production here first. I hope everybody has this mentality,” Koo said.

Karen Erickson of Erickson Beamon has produced out of New York City and Belgravia in London. “For me, it adds to the intrinsic value of what we do,” said Erickson. “It means so much to know the name of the person who made each piece. It makes it have a soul and a heart.”

Last year, after nearly 25 years at 498 Seventh Avenue, Erickson was unable to renew her lease. “After all those years, my landlord said no, and I was forced to leave the garment center,” said Erickson, who moved operations, and Showroom Seven, which she also owns, to 11th Avenue in Chelsea. “They had no interest in renewing my lease because they were renting it to a big British p.r. company,” said Erickson. “And with their strong pound and our weak dollar, they could pay $75 a square foot.”

Erickson traces the change in garment center mentality back to Sept. 11, 2001. “After 9/11, Oppenheimer Funds wanted to maintain a low profile,” she recalled. “They didn’t want to be in such a visible place where they could be damaged or hurt, so they came and took six floors in my building, and paid an outrageous amount of rent. They ended up leaving because they couldn’t stand the garment center, how unslick it is.”

Still, the new market rate was set. Erickson’s perfectly happy with her space on the West Side, but she’s wary of the future. “We need some sort of protection,” she said. “What makes New York great is the fact that there is a garment center, and there is a fashion industry. If they only cater to real estate people and don’t offer any sort of protection, what’s going to happen in 10 years when my lease is up here?”

At 240 West 37th Street, the main lobby has been closed for renovations for several months — something some say is becoming increasingly more common as owners try to attract higher-paying renters and nudge out tenants. Visitors must enter through the run-down freight entrance, where a security guard tracks visitors and ensures the building is empty by 8 p.m. The guard, who declined to give his name, said if anyone walks past him without showing an ID, he has been instructed to call the police to have them arrested for trespassing. Tenants will be out by the end of the year, he said.

Last summer, developer Isaac Chetrit bought the 131,900-square-foot building for $43 million. Around that time he also bought a nearby 21-story Sixth Avenue building for $49 million. The Chetrit family is said to own The Toy Building as well as a stake in the Sears Tower in Chicago. Chetrit could not be reached for comment.

As factory workers wheeled out sewing machines with the pallor of pallbearers, one displaced worker, who requested anonymity, said, “From their point of view, I understand they want to invest in their commercial real estate to see a better return on their investment. But from the tenants’ point of view, we are being squeaked out to the outer boroughs. The way things are going, we will be phased out to a one- or two-block area.”

In addition, sewing machines and other equipment, much of which has been used by the same sets of hands for decades, is being sold at dirt cheap prices. Many companies are selling their old sewing machines for as little as $100 and the buyers often flip them on eBay for $800 or $900, he said.

Teng, Wainwright and others claimed the city is not enforcing the existing zoning, with many landlords already renting to nonapparel companies. “If we cannot enforce what is the law right now with the one-to-one ratio, what leads you to believe any other proposals will actually come to life?” Teng asked of the rule that requires the neighborhood’s space to be divided equally between manufacturing and nonmanufacturing. “But I am willing to entertain whatever the city proposes. Mayor Bloomberg has been very supportive of the industry and the EDC has been researching how to sustain the fashion industry since 2006.”

The fact that the fashion industry is New York City’s second largest employer spurs her on. And the diversity it provides is essential to New York’s culture, Teng said. Creating an online directory of apparel-related businesses is an initiative she has suggested.

Randall said, “If these factories are so critical to New York City, why don’t these designers agree to give them 20 percent of their production? Designers would tell you they could never be competitive if they produced in New York City.

“It’s all trickle down. Consumers pressure retailers [for markdowns,] retailers pressure designers, designers pressure contractors, which is why there is no one simple answer.”

Jeanette Nostra is president of G-III Apparel Group Ltd., a $730 million operation by Wall Street estimates. “When I began in this business 33 years ago, I couldn’t walk down the sidewalk from my loft at 36th and Ninth to my office at 37th and Seventh without dodging racks of clothes, and having the truckers chirp me as I walked by. There was a vibe, a real camaraderie. That’s gone. That manufacturing is not coming back here. We need to revitalize the area. What would be wonderful would be for the city to make it easy for the buyers who come here from across the country by having more restaurants and boutique hotels. During market week, there could be transportation to and from the Javits Center and the Piers from the garment center.”

Perhaps no one is more excited about the prospect of preserving the area than small business owner Samantha Cortes, who organized a group that first handed out Save the Garment Center pins 18 months ago. A 35 percent rent hike for her 242 West 38th Street offices motivated her to take action. Asking designers to maintain a small percentage of their production in the U.S. and promoting New York-made goods in a more organized way are a few of the ideas she has discussed with city officials, but to no avail, she said.

Encouraged as she is by the latest developments, Cortes said, “From proposal to action is going to be a long step.”

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