New York Market Overview

Office:

The chief executive of Manhattan’s second-largest landlord bemoaned free rent and tenant allowances as a “killer.” Vornado needs to commit as much as $300 per square foot on concessions to secure companies as tenants for more than $40 per square foot over 10-year deals. The weighted average rent of Vornado’s Manhattan office buildings is $100 per square foot.

Demand for the best office buildings in New York has not only recovered but it’s causing a spillover effect. Large tenants that have lease terminations over the next several years are racing to snap up space while it’s hot in trophy towers. Meanwhile, yet-to-be constructed towers like 175 Park Avenue, 347 Madison Avenue, 3 Hudson Blvd, 70 Hudson Yards and 2 World Trade Center are tempting anchor tenants with $200-per-foot rents in hopes of rising from the ground.

245 Park Avenue is being transformed with a new lower façade and amenities like a rooftop park. 245 Park has 300,000 RSF available.

The availability rate for Class A buildings in Midtown is 8.5%, while four years ago it was 15%. Overall, the Midtown availability is 16.6% but without sublets it is 13% on a direct basis. The Class A trophy rent is $143 per foot while the rest of Midtown averaging $83 per foot. Renters are spending more to be in the best buildings with amenities and appearance.

Looking at the effective rate of vacancy right now and looking at the pipeline of new buildings, on Park, Madison and Sixth Avenues there is no space. The A- and B++ buildings might actually get a lift.

Another 850,000 square feet is on the market at Brookfield’s 660 Fifth Avenue. But that could be absorbed by Citadel, who is looking for 400,000 to 800,000 square feet for around the next 10 years, while 350 Park Avenue is demolished, built anew and made ready to move back in.

Jefferies, now located at 520 Madison Avenue, is seeking 800,000 square feet.

JPMorgan Chase will likely keep its tower at 383 Madison Avenue, but may also retain space at 390 Madison and 277 Park that it leased during construction. 270 Park Avenue is expected to open by the end of 2025.

Small financial tenants are having a rough time finding high-quality space to lease in the Plaza District. The bulk of the vacancies are at the base of a building with bad light and air and no views. Because of that need, Lever House, at 390 Park Avenue, is working on two pre-built 10,725-square-foot floors at $200 per foot. After Lever House’s 12th-floor marketing space was grabbed by a tenant, they decided to build out two more floors.

Tenants are ready to pay for well-managed, well-located spaces.

590 Madison at East 57th Street is updating its building amenity center. IBM’s former 250,000-square-foot space has an asking rent ranging from $106 to $120 per foot.

Leasing activity was down almost 25% from the previous quarter, amounting to just 6.33 million square feet. A drop in demand is common in the first quarter, but a decline of this size is rare. Total leasing volume fell below the five-year rolling quarterly average.

The availability rate in March was 18.1%, a record high for the end of a quarter but a slight improvement from February’s 18.2%.

The market could be in for another shock as Amazon, one of the nation’s largest office tenants, considers downsizing its footprint. Other tech companies are expected to rightsize their office footprints this year.

The City of New York terminates leases for two agencies at 250 Livingston Street which occupy the balance of the office tenants. The city exercised a termination option to end its lease in August 2025. Fitch cited the expected exit in issuing a warning about the CMBS debt tied to the property.

Charles Cohen’s 750 Lexington Avenue value slashed by 83%, as foreclosure looms. The embattled billionaire takes another hit, after WeWork quit paying rent. The value of 750 Lexington Avenue was cut to just $50 million, that’s an 83% decline from the property’s 2015 valuation of $300 million. The $130 million loan tied to the Midtown office building transferred to special servicing for payment default. As of March, Cohen was over three months delinquent on debt payments and servicer commentary signals foreclosure is on the table.

American Eagle leased 338,000 square feet at 63 Madison Avenue. The 20-year deal includes a direct lease for 108,194 square feet. Also included is a sublease with CBS. to lease a total of 162,000 square feet that will eventually convert into a direct lease.

Michael Kors’ renewed its 203,000-square-foot lease at 11 West 42nd Street.

King & Spalding signed a new 175,000-square-foot lease at 1290 Sixth Avenue.

Burlington Stores expanded its lease at 1400 Broadway, and jewelry brand David Yurman did the same at Hudson Square Properties’ 200 Hudson Street. Both firms signed for more than 150,000 square feet.

Michael Kors, a clothing brand, signed a deal to renew its HQ in the Grand Central building at 11 West 42nd Street for 203,000 SF.

Major League Soccer, signed a new lease at 2 Penn Plaza, relocating from a Fifth Avenue space, for 126,000 SF.

Betterment, signed a new sublease in the Hudson Yards building at 5 Manhattan West for 113,000 SF.

NYU Langone Health, the health system, signed a new lease in the Long Island City building at 45-18 Court Square West in Long Island City for 105,000 SF.

Citizens Bank signed a new lease at 1301 Sixth Avenue in Midtown West for 74,000 SF.

Coinbase signed a 67,000 sf lease at One Madison for a 11-year lease. Coinbase also has a 30,000 square feet office at 55 Hudson Yards.

GTCR, a private equity firm, signed a new lease at 425 Park Avenue in the Plaza District for 56,000 SF.

Sumitomo Corp, signed a new lease at 277 Park Avenue in Grand Central for 50,000 SF.

Arsenal Capital Management, signed a new lease in the Grand Central building at 277 Park Avenue for 47,000 SF.

Orbital Kitchens, a food delivery startup, signed a new lease in Long Island City at 42-45 12th Street for 35,000 SF.

Cole Schotz, a legal services firm, signed a new 77-year lease in the Midtown West building at 1325 Sixth Avenue for 32,000 SF.

Williams Equities scored a refinancing for two interconnected cast-iron buildings at 28-40 West 23rd Street and received a five-year, $155 million loan from Citi Real Estate Funding. Williams is planning several upgrades to the 12-story, 577,000-square-foot Class B property, including a roof deck and triplex penthouse office suite.

The MTA is looking for a “master lessor” to manage 25,000 feet of retail space beneath the Long Island Rail Road’s new East Midtown hub at Grand Central. Retailers had been hesitant to take up space at the underground station earlier in the post-Covid world, but healthy transit use numbers have been an encouragement to the MTA. The space includes 32 separate retail units.

Retail:

Bedford Stuyvesant New Beginnings Charter School signed a lease in the Williamsburg building at 217 North 10th Street for 51,498 sf.

Hobby Lobby signed a new lease in the New Springville area of Staten Island at 280 Marsh Avenue for 42,000 sf.

The National Museum of Mathematics signed a new, short-term lease at 225 Fifth Avenue for 27,158 sf.

Revel signed a new lease at the Jackson Heights building at 90-10 Ditmars Boulevard for 26,520 sf.

Guitar Center, signed a new lease in Brooklyn Heights at 540 Fulton Street for 19,289 sf.

Ferrari signed a new lease in the Soho building at 568 Broadway for 7,000 sf.

Trends Dispensaries signed a new lease in the Long Island City building at 27-25 44th Drive for 6,000 sf.

Blue Mezze, a restaurant, signed a new lease at 19 West 31st Street for 2,944 sf.

WatchHouse signed a new lease in the Grand Central building at 405 Lexington Avenue for 2,000 sf.

24 Hour Deli and Grocery signed a lease at 1938 Nostrand Avenue in Flatbush for 1,500 sf.

Madison Avenue between East 57th and East 72nd streets. The availability rate for the iconic corridor dropped to 5.9%, a record for the stretch.

In the Meatpacking District the availability rate rose 6 percentage points year-over-year to 30.6%. The only area of the city with more availability was Herald Square, with a 35.2% rate.

The average asking rents on Upper Fifth Avenue and in Times Square increased year-over-year, but they decreased across the rest of the submarkets, which were almost entirely in Manhattan. The average asking rent in the first quarter was $537 per square foot, also down from the previous quarter.

Upper Fifth Avenue boasted the highest asking rent last quarter at $2,163 per square foot, while Soho was on the other end of the spectrum, at $281 per square foot.