Office leasing is gaining momentum as the delta variant recedes and worker bees return to the hive — albeit many are yet to appear for all five days a week.
“The second wave was scary,” said Matt Astrachan, vice chairman of the global real estate service company JLL. “That was the bottom and once we came off it we saw a robust surge in activity.”
That activity — tours, proposals, lease negotiations and signings — however, is still centered on the better, new construction or Class A office towers that have added oodles of amenities.
So far, 42% of the leasing through September has been focused on 24% of the space, said Paul Myers, vice chairman of CBRE. “Companies want places that their employees and staff and partners want to come to, and shows them off as a company, and shows that they are at the forefront of their industry,” said Gregg Cohen, principal of commercial real estate firm Cresa.
As CBRE’s tristate CEO Mary Ann Tighe recently described it, “New is the new location.”
Tighe is marketing the reinvented 550 Madison Ave. for Olayan, where The Post first reported that insurance giant Chubb has a large 10-floor lease underway, with several other tenants jockeying for other space.
That former Sony tower, between West 55th and West 56th streets, is still under reconstruction with new dining areas, amenities and a reinvented through-block garden atrium.
“People are being drawn to towers that went through renovation and offer more — like a great amenity space or an urban space downstairs with a food component,” explained David Falk, tri-state president of Newmark who is the leasing agent for One World Trade Center, which has amenities and plenty of connected shopping.
The completely new Midtown tower, SL Green Realty Corp.’s One Vanderbilt Ave. which connects to Grand Central Terminal, Falk says, did “exceptionally well and tells the whole story because tenants will pay a high rent to be in there. It’s run like the Four Seasons, and they see the attention to details as if it were a great hotel.”
Falk also cites Brookfield’s open 1.8 million-square-foot One Manhattan West as “gorgeous,” and Related’s upcoming 2.9 million-square-foot 50 Hudson Yards, scheduled to open in 2022, as “extraordinary” — plus both are in campus-like environments attached to shopping experiences, dining and wellness features.
Due east of those projects, Vornado Realty Trust is adding a whopping 100,000 square feet of amenities at the base of One Penn Plaza that will serve all its Penn Plaza tenants, including Facebook, which leased the entire Farley Building over the new Moynihan train hall, and Apple at 11 Penn Plaza.
But single towers are also pouring capital into massive renovations to attract tenants who want to attract and retain employees.
“The physical space serves as a beacon for the brand,” said David Goldstein, vice chairman and director of Savills.
Elliott Ingerman, principal of Tribeca Investment Group, said his company, which also developed the Baccarat Hotel, is putting $350 million into the former Textile Building at 295 Fifth Ave. in Nomad in order to transform the pre-war structure into 700,000 square-feet of modern offices and retail space.
When it opens for tenants in the middle of 2022, it will have an enlarged, plant-filled lobby and café; a lower level for amenities, a two-story, arched glass penthouse that echoes the three entry arches, additional elevators and 1,100 new windows.
Nuveen, the investment management arm of TIAA, has revamped 730 Third Ave. with Taconic Partners as development advisors, Gensler architects and Paul Amrich of CBRE heading office leasing.
That building is setting aside the entire second floor for tenant amenities that will include a food hall and fitness center in the hopes of attracting tenants to roughly 550,000 square feet on the upper stories. Here, workers will have access to a 7,000-square-foot outdoor terrace with pergolas supplying gentle shade.
“There is no more room for generic work environments,” insisted Laurent Lisimachio, principal and design director at Gensler. “You are competing with someone’s living room so commercial real estate has to be the site of incredible experiences.”
For instance, Marx Realty went for a hotel vibe with the amenity spaces at buildings like 545 Madison Ave. and 10 Grand Central. Both were recently refreshed with chilled-out lounge areas.
Resolution Real Estate, the owners of the historic 330 W. 42nd St., a blue building once owned by McGraw Hill, is putting $120 million into modernizing the 700,000-square-foot property with new a wellness center, outdoor terraces plus conference and event spaces designed by MdeAS Architects and being leased by Newmark.
Meanwhile, Taconic Partners has new projects underway that include the boutique renovation of 817 Broadway, a life science-focused development with Nuveen at 125 West End Ave. and the multi-building Essex Crossing on the Lower East Side.
At Essex Crossing, two office blocks of 175,000 and 179,000 square feet respectively at 145 and 155 Delancey St., have outdoor terraces and are located in the base of residential towers with direct connections to the Market Line food hall and green spaces and are being marketed through Cushman & Wakefield.
One “must-have,” brokers say, is a flexible conference center, while tenant-only gyms feel “safer” as owners not only clean the place but keep track of the users.
The Empire State Building has created a “vertical campus” which has a private gym and an upcoming Starbucks Roastery. “It has been modernized for the 21st century with an accessible price — and is the undisputed leader in energy efficiency,” said Anthony Malkin, chief executive of the Empire State Realty Trust. Rents there start at $50 per foot, rather than in the triple digits like most new buildings, he said.
It’s not just giant towers that are getting traction. Myers says the smaller boutique buildings “are on fire.”
Kerry Powers, vice president of asset management with Savanna, says they have “good momentum” and a lot of interest at their properties that include the boutique 106 W. 56th St. aka “The Six.”
That 26-story building has a hotel-like hospitality feel throughout its lobby, lounge and lower level conference center. Floor sizes are under 5,000 square feet, some have private terraces and all have upscale bathrooms and appointments such as padded leather on the walls of the elevator lobby.
Asking rents range from $100 to $180 per foot at the top. Leasing agent Peter Turchin of CBRE chalked up another full-floor lease in mid-October to add to its three other done deals. “The simple advice [to attract tenants] is to spend money on your building and put in good lobbies, good HVAC and good amenities — at the end of the day, it’s not all that complicated,” Myers said.
Some of that leasing momentum is thanks to growing firms like Cockroach Labs, which subleased 64,516 square feet from Peloton at reinvented 125 W. 25th St. which is now owned by the Swiss-based AFIAA Foundation for International Real Estate Investments and “only” grew by 281.5%, Newmark found.
Other growers include TikTok which took a 232,138-square-foot space at the Durst Organization’s 151 W. 42nd St., a growth of 2,221.4%; DailyPay’s sublease of 137,274 square feet from S&P Global at 55 Water St. was 1,139% larger than its current spot at 55 Broad St.; while Freshly, which was acquired by Nestle, signed for 1,403% more space in its 92,306-square-foot move to Loeb Partners’ 28 E. 28th St. — aka 63 Madison Ave.
“The heads of most companies believe in the office environment and want to come back — whether it’s five days a week or a hybrid model.”
Josh Wein of RAL Development
Many large occupiers of office space are also giving employees notice that they expect them back at their desks within the next few months, with each industry watching to see what the leaders do, before presenting options to their own employees.
“The heads of most companies believe in the office environment and want to come back — whether it’s five days a week or a hybrid model,” said Josh Wein of RAL Development, which is completing Zero Irving at 124 E. 14th St.
Most commercial real estate executives have been working in offices and showing spaces for much of 2021. According to Kastle Systems, law firms have 49.6% percent of their employees already in the office compared to 31.2% of city industries overall — and are poking other employees to get back where they once belonged.
“The [law firms] are more eager to return because it’s a real in-person business and there is so much mentoring and collaboration that takes place and it’s hard to duplicate that at home and on Zoom,” said Matt Barlow, vice chairman of Savills.
On recent property tours, Jonathan Bock of Olmstead Properties said he was pleasantly surprised to show space “and actually see people working at their desks.”
