Office rental is gaining momentum as the delta variant recedes and worker bees return to the hive – although many do not yet appear five days a week.
“The second wave was scary,” said Matt Astrachan, vice president of global real estate services firm JLL. “It was the bottom and once we got out of it we saw a big increase in activity.”
This activity – visits, proposals, lease negotiations and signings – is however always centered on the best new constructions or Class A office towers that have added many amenities.
So far, 42% of rentals through September have focused on 24% of the space, said CBRE vice president Paul Myers. “Companies want places where their employees, staff and partners want to come, showcase them as a company and show that they are at the forefront of their industry,” said Gregg Cohen, director of the commercial real estate company. Cresa.
As Mary Ann Tighe, CBRE’s tri-state CEO, recently described, “
New is the new site.”
Tighe markets 550 Madison Ave. reimagined for Olayan, where The Post first reported that insurance giant Chubb had a large 10-story lease underway, with several other tenants jostling for other space.
This former Sony Tower, between West 55th and West 56th streets, is still being rebuilt with new dining areas, amenities, and a reimagined garden atrium.
“People are drawn to towers that have been refurbished and offer more – like a large amenity space or an urban space downstairs with a food component,” explained David Falk, Newmark Tri-State Chairman who is the rental agent for One World Trade Center, which has amenities and many connected stores.
Midtown’s newest tower, One Vanderbilt Ave. of SL Green Realty Corp. which connects to Grand Central Terminal, Falk says, has “worked exceptionally well and tells the whole story because tenants will pay high rent to be there. It’s run like the Four Seasons, and they see the attention to detail as if it were a great hotel.
Falk also cites Brookfield’s open 1.8 million square foot One Manhattan West as “magnificent” and Related’s upcoming 2.9 million square foot 50 Hudson Yards, slated to open in 2022, as ” extraordinary” – in addition, both are on campus. environments related to shopping experiences, dining and wellness features.
East of these projects, Vornado Realty Trust is adding 100,000 square feet of amenities to the base of One Penn Plaza that will service all of its Penn Plaza tenants, including Facebook, which has leased the entire Farley building to above the new Moynihan train concourse, and Apple at 11 Penn Plaza.
But individual towers are also investing capital in 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 president and director of Savills.
Elliott Ingerman, director of Tribeca Investment Group, said his company, which also developed the Baccarat Hotel, is investing $350 million in the former textile building at 295 Fifth Ave. to Nomad to transform the pre-war structure into 700,000 square feet. of modern offices and commercial spaces.
When it opens to tenants in mid-2022, it will have an expanded, plant-filled lobby and cafe; a lower level for amenities, a two-story vaulted glass penthouse that echoes the three entrance 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 CBRE’s Paul Amrich as head of office leasing.
This building reserves the entire second floor for tenant amenities, which will include a food court and fitness center in hopes of attracting tenants to approximately 550,000 square feet on the upper floors. Here, workers will have access to a 7,000 square foot outdoor terrace with pergolas providing soft shade.
“There is no more room for generic work environments,” insisted Laurent Lisimachio, Principal and Design Director at Gensler. “You’re competing with someone’s living room, so commercial real estate has to be the place for amazing experiences.”
For example, Marx Realty has opted for a hotel vibe with the amenity spaces in buildings like 545 Madison Ave. and 10 Grand Central. Both have recently been refreshed with relaxing lounge areas.
Resolution Real Estate, owners of historic 330 W. 42nd St., a blue building once owned by McGraw Hill, is investing $120 million to upgrade the 700,000 square foot property with a new wellness center. be, outdoor terraces as well as conference and event spaces designed by MdeAS Architects and leased by Newmark.
Meanwhile, Taconic Partners has new projects underway, including the store renovation at 817 Broadway, a life sciences-focused development with Nuveen at 125 West End Ave. and the multi-building Essex Crossing on the Lower East Side.
In Essex Crossing, two office buildings of 175,000 and 179,000 square feet respectively at 145 and 155 Delancey St., have outdoor terraces and are located at the base of residential towers with direct connections to the Market Line food hall and green spaces and are marketed by Cushman & Wakefield.
A “must have,” brokers say, is a flexible conference center, while tenant-only gyms feel “safer” as landlords not only clean the place up, but keep track of users.
The Empire State Building has created a “vertical campus” that features a private gym and a future Starbucks Roastery. “It’s been modernized for the 21st century with an accessible price – and is the undisputed leader in energy efficiency,” said Anthony Malkin, managing director of the Empire State Realty Trust. Rents there start at $50 per foot, rather than triple digits like most new buildings, he said.
It’s not just the giant towers that are gaining popularity. Myers says the shop’s smaller buildings “are on fire.”
Kerry Powers, vice president of asset management at Savanna, says they have “good momentum” and a lot of interest in their properties which include the boutique 106 W. 56th St. aka “The Six.”
This 26-story building offers an atmosphere of hotel-like hospitality in its lobby, lounge, and conference center on the lower level. Floor sizes are under 5,000 square feet, some have private terraces, and all have high-end bathrooms and appointments such as upholstered leather on the elevator lobby walls.
Asking rents range from $100 to $180 per foot at the top. CBRE leasing agent Peter Turchin entered into another full floor lease in mid-October to add to his other three completed deals. “The simple advice [to attract tenants] is to spend money on your building and put in good lobbies, good HVAC, and good amenities — ultimately it’s not that complicated,” Myers said.
Part of this rental momentum is due to growing companies like Cockroach Labs, which has sublet 64,516 square feet to Peloton at the reimagined 125 W. 25th St., now owned by the Swiss-based AFIAA Foundation for international and “only” real estate investments grew 281.5%, Newmark found.
Other producers included TikTok which occupied 232,138 square feet of space at 151 W. 42nd St. in the Durst organization, a growth of 2,221.4%; DailyPay’s 137,274 square foot sublease to 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 Nestlé, signed on for 1,403% more space in its 92,306-square-foot move to 28 E. 28th St. from Loeb Partners — aka 63 Madison Ave.
Many large office space occupiers are also telling employees they expect them back at their desks in the coming months, with each sector watching what leaders are doing, 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, who finishes Zero Irving at 124 E. 14th St. .
Most commercial real estate executives worked in offices and showed spaces for much of 2021. According to Kastle Systems, law firms already have 49.6% of their employees in the office, up from 31.2 % of all industries in the city – and steal other employees. to return to where they once belonged.
“The [law firms] are more eager to come back because it’s a real in-person business and there’s so much mentorship and collaboration going on and it’s hard to replicate that at home and on Zoom,” said Matt Barlow, VP of Savills.
On recent property tours, Jonathan Bock of Olmstead Properties said he was pleasantly surprised to show space “and see people working at their desks”.