Despite a lethargic 2023, office leasing got its mojo back in the fourth quarter when the year’s largest deals were completed.
Law firms led the action with blockbuster leases inked after Labor Day.
Davis Polk renewed and expanded its lease to 630,000 square feet at RXR’s 450 Lexington Ave. Paul Weiss will relocate from 1285 Sixth and expand to 765,000 square feet at Fisher Bros.’s 1345 Sixth, which has $120 million in new amenities. Quinn Emanuel is leaving 51 Madison Ave. for 132,000 square feet at 295 Fifth Ave., which received a $350 million redevelopment. Its spin-off, Selendy Gay Elsberg, also expanded and signed a direct lease for 101,000 square feet at Vornado’s 1290 Sixth Ave. King & Spalding will join them in 175,000 square feet in a move from nearby 1185 Sixth Ave.
Regardless of the industry, all tenants are looking for the same things. “Location and access to transportation has moved to the top of the criteria list,” said Chris Corrinet of CBRE.
That’s why Park Avenue, north of 46th Street and around Grand Central are “bright spots in a moribund area,” added David Hoffman of Cushman & Wakefield. An example: MetLife renewed and expanded to 400,000 at its namesake tower at 200 Park Ave., which sits on top of Grand Central and now serves LIRR riders. However, Class A buildings outside of the new sweet spots still have large vacancies. RXR and SL Green’s 5 Times Square has 750,000 square feet available with gorgeous amenities and LED signage.
Commuters to Hudson Yards can hop on the 7 train, making it easy for Wells Fargo employees to relocate from 150 E. 42nd St. to its newly purchased 300,000 square feet at 20 Hudson — where it already has 500,000 square feet at 30 Hudson Yards.
Fresh spaces are equally important to tenants. That’s why Hudson Yards, Manhattan West, the Farley Building over the new Moynihan Station, Morgan North and the area around Penn Station are all completely reinvented.
On Seventh Avenue, Vornado’s Penn 2 is now complete and West 33rd Street will soon become a plaza.“You can feel that the area will be transformed and the folks from Vornado have done a good job of changing people’s perceptions,” said Mark Weiss of Cushman & Wakefield, whose colleagues will now lead leasing for Penn 2.
More leasing action is coming from companies facing lease expirations. IBM and Franklin Templeton, for instance, will move to SL Green’s reinvented One Madison in Nomad.
LinkedIn recently renewed and expanded at the Empire State Building to 526,000 square feet.
“If you don’t go to a brand-new, glass-wall building and look for the next tier, you come to us.”
Anthony Malkin of Empire State Realty Trust said deals like that are thanks to the building’s campus-like amenities, improved energy efficiency and indoor air quality. “If you don’t go to a brand-new, glass-wall building and look for the next tier, you come to us,” he said.
Pricing for such top-tier trophy properties, especially in the Plaza District, is hitting $200 to $300 per square foot — think One Vanderbilt, 550 Madison, 767 Fifth, 425 Park and 9 W. 57th St. In contrast, buildings without amenities are struggling for tenants at anywhere from $30 to $80 per foot.
Office and amenity design continues to be influenced by hospitality, said Gensler architect Robert Fuller.
Baccarat is moving to a penthouse headquarters and showroom with a terrace at Marx Realty’s hospitality-infused 545 Madison Ave. — and signed a branding deal. The building’s lounge will have a Baccarat chandelier and use its barware.
“The Rivian house car will get the Baccarat scent in the car,” said Craig Deitelzweig of Marx Realty.Marx will raise rents there and at 10 Grand Central Place where a new floor of amenities will include a 150- to 200-seat town hall space, a screening room, a lounge, a fireplace and even a spot for podcasting.
“Is it worth it? Yes, it is,” Deitelzweig said. “It pays for itself.”
More amenities are also coming to 9 W. 57th St., where owner Stefan Soloviev is adding $45 million in improvements. He’s building a 27th-floor amenity center with dining overlooking Central Park and space for 150 people to meet. The lower level has a full gym with a cold plunge pool and a hot pool.“The 150-person meeting area was a suggestion by a tenant,” Soloviev said. “I am listening to what tenants want.”
Jeff Peck of Savills, who has clients seeking 20,000 to 150,000 square feet, calls it the “flight to excitement.” “If you can make something lackluster into something ‘wow,’ we can lease it all day long,” echoed Deitelzweig.
To drive excitement in the Meatpacking District, Rolls-Royce will create a VIP experience center in a penthouse with a wraparound terrace at the new office tower and historic retail project at 50 Ninth Ave. being developed by Tavros (with an asking rent over $200 per foot).“People want to be in the most dynamic neighborhoods and want to pay a premium to be there and in buildings that have amenities for the employees,” said Nicholas Silvers of Tavros.
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