Manhattan’s Office Market Undergoes Transformation
A fresh wave of development is reshaping Manhattan’s office landscape, with numerous older and less efficient buildings being converted into apartments.
There are various projects progressing at different stages. Some are in the initial construction phase, while others have secured anchor tenants and are poised for vertical growth. Then, there are those still waiting for the right mix of tenants and financing before moving forward.
Peter Regardi, the Chairman and President of JLL New York, provided insights on the overall situation for Realty Check.
Due to a favorable balance of supply and demand, at least four projects are confirmed to commence with the construction of JPMorgan Chase & Co.’s new headquarters skyscraper.
“Citadel Tower is nearby,” Regardi mentioned. The Vornado-Rudin-en-Griffin project, known as 350 Park Avenue, is anticipated to start breaking ground early next year, with two of Griffin’s Citadel companies lined up as anchor tenants.
“Relate will construct 70 Hudson Yards for Deloitte,” he noted, highlighting a lease agreement made by JLL. Additionally, BXP, formerly known as Boston Properties, is set to be the tenant at 343 Madison Avenue and has a preliminary deal with CV Star as the anchor tenant.
Extel has also begun development on 570 Fifth Avenue, where Ikea’s main store will be established, and its chief, Gary Barnett, is close to finalizing a deal with law firm Simpson Thatcher & Bartlett for the project’s 1 million square foot office space.
However, Regardi pointed out that uncertainty looms over some properties. “There are plenty of discussions, but not much action,” he observed.
The most notable example is 175 Park Avenue, where Regardi acts as the leasing agent. This ambitious project, called the Cloudbuster, aims to incorporate the Grand Hyatt Hotel and reach a height of nearly 1,600 feet. The design remains under revision by the architecture firm SOM. Another proposed skyscraper by Vornado will rise on the empty lot of the former Pennsylvania Hotel, for which JLL is also serving as leasing agent. There’s also an unclear SL Green proposal for the site of the old Brooks Brothers store at 346 Madison Avenue.
Beyond these, there are significant locations still surrounded by uncertainty.
Larry Silverstein and American Express are reportedly in confidential discussions regarding a new tower at the Two World Trade Center.
Even murkier is the future of the former Roosevelt Hotel, with its owner, Pakistan International Airlines, weighing its options.
Office demand remains resilient, with “everyone scrambling to find viable development sites,” Regardi commented.
He added that all ongoing or planned projects will likely require leases exceeding $200 per square foot, affected by land costs, development expenses, high interest rates, and the desired returns for builders.
In a positive development, Lever House has achieved 100% occupancy, according to its owners, Brookfield Properties and Waterman Interests. This milestone coincided with the completion of a $100 million renovation of the iconic mid-century structure.
Located at 390 Park Avenue, Lever House has had a tumultuous history, especially after its parent company, Unilever, relocated to Connecticut in 1997. However, after being acquired by Brookfield & Waterman in May 2020, the property, which was largely empty at that point, underwent significant renovations overseen by the Landmarks Preservation Commission. The building now houses hedge funds, private equity firms, and what the owners refer to as “prominent family offices.”
At 245 Park Avenue, efforts to fill remaining vacant space are slowly progressing.
In a recent agreement, long-time financial tenant EQT Partners expanded its leased area by 38,358 square feet, bringing its total space to 114,562 square feet and the building’s occupancy to 95.7%.
The asking rent stood at $190 per square foot. Notably, EQT has seen rapid growth, having only become a tenant in December 2024.
The 1.8 million square foot tower is undergoing what SL Green’s Lease Director, Stephen Durrells, describes as a “transformative redevelopment.” This includes a newly created plaza, retail spaces, and a lobby designed by KPF Architects. A large wellness center and a terracotta-covered façade are also part of the redevelopment. In 2022, SL Green obtained management rights to 245 Park, which is currently around 90% leased.
