Manhattan’s Office Towers Begin to Rise
While it may be a few years before it reaches its peak, new office towers in Manhattan are finally starting to take shape.
This comes as rents for premium office space in prime areas are climbing towards $200 per square foot.
JPMorgan Chase’s sleek new headquarters at 270 Park Avenue exemplifies the attraction of this ambitious skyline transformation.
As David Goldstein from Savills notes, “There’s a growing dialogue about how new buildings are reshaping cities.” He adds, “The construction pipeline is developing, and early projects will benefit from both timing and pricing advantages.”
A prime example is BXP’s 343 Madison Avenue, which covers 937,000 square feet and is designed by KPF. A letter of intent has been signed with CV Star for roughly a third of the 46-story structure, expected to be ready by 2029.
On a similar note, RXR and TF Cornerstone are negotiating with key office tenants for their substantial 2.9 million square foot tower at 175 Park Avenue. This project, designed by Skidmore, Owings & Merrill, will soar 1,575 feet above Grand Central Terminal and incorporate a Hyatt hotel along with transport improvements.
Meanwhile, Vornado and Rudin have gained city approval for a 1.7 million square foot tower at 350 Park Avenue, partnering with Citadel to provide 850,000 square feet of anchor space.
Additionally, Silverstein Properties is close to finalizing a deal for American Express to relocate to the new Second World Trade Center, which is projected to cover about 2 million square feet.
Deloitte is making a move from Rockefeller Center, having decided to lease 700,000 square feet in Related’s under-construction 1.1 million square foot project at 70 Hudson Yards.
In the vicinity, BXP and Joseph Moinian are making strides to acquire 3 Hudson Boulevard, aiming to commence development soon.
The shift in rent expectations is drawing investors back, leading to increased buying and selling activity in the market.
“Investors are once again looking for offices that have been labeled ‘kryptonite’ for quite some time,” states Goldstein.
SL Green, linked to the Vanderbilt family, recently invested $136 million in a site at 346 Madison Avenue. However, the existing building will need to be demolished to start anew.
This price point is relatively low compared to the fully vacant block at 405-417 Park Avenue, which Newmark is listing for around $500 million, envisioning a possible 700,000 square foot tower.
Bob Nakal from BKREA is marketing various land parcels and 17 air rights transfers in Manhattan. Some may transition into residential spaces, though a few could end up as office buildings.
A significant amount of new towers—over 30 million square feet—has been constructed in the past decade, with nearly all of it leased. Jonathan Mazur from Newmark anticipates another 10 million square feet will be added by 2032 to satisfy demand, with further expansion in subsequent years.
Some developers are opting for existing buildings that lend themselves to faster renovations over starting from square one.
Goldstein mentions, “Investors are taking another look at offices that have struggled recently.”
In the meantime, there’s a search ongoing for a lease covering the entire Chrysler Building. Cooper Union is seeking a tenant for the partially vacant, iconic Art Deco structure, and SL Green seems interested.
Eastdil’s recent $1.08 billion transaction, involving the relocation of the IBM building at 590 Madison Avenue to RXR, has invigorated the tower sales market. Furthermore, Norges Bank Investment Management shifted from having no funds at 343 Madison Avenue to acquiring 1177 Sixth Avenue for $572.29 million, which was sold by Eastdil on behalf of Silverstein Properties and CalSTRS.
Will Silverman from Eastdil reflects, “These deals signify the institutional demand for New York City offices, reshaping perceptions positively.”
The new pricing landscape has made lenders, who once gained control of various assets during the pandemic’s lows, more willing to divest. Other investors are also selling to clear debts or to free up cash for future investments.
Tishman Speyer is offloading 370,000 square feet across the lower 22 floors of CitySpeyer at 150 W. 56th St.
According to JLL’s Andrew Skandarios, “We’re past the low point, prices are increasing, yet they remain about 30-40% lower than their previous highs.”
Lockwood and MetLife are also selling a Grand Central duplex at 140 East 45th Street for over $270 million, significantly lower than the $401 million they paid in 2011.
The 137,000 square foot vacant 90th Street bond is available for sale via Newmark as well.
Debt issues prompted Charles Cohen to unload the largely empty 382,500-square-foot office tower at 623 Fifth Avenue to Vornado for $218 million. Vornado plans substantial investments in an effort to attract a tenant by 2027.
Meanwhile, BKREA and Rudder Property Group are selling the furnished former Core Club condos at 65 E. 55th St. to RFR for $40 million.
Across the street, Blackstone’s Park Avenue Tower at 65 E. 55th St. is being marketed through Eastdil, with a sale to SL Green for $730 million in the works.
This year, RFR sold a vacant office at 522 Fifth Avenue to Amazon for $340 million, along with an extra $85 million in retail space. RFR’s Gabby Rosen commented, “This illustrates the shortage of large block spaces, as they wanted to upgrade from an older property with more amenities.”
