Demand for new technologically exciting spaces continues — even though some are worried about too many office towers on the drawing boards.
The addition of Hudson Yards has opened up many sites for offices, as was the intention when the Bloomberg administration planned the rezoning and the extension of the No. 7 subway line to serve the future office and business area. That Hudson Yards subway stop should open early next year.
But it would be naïve to believe that major corporations would gobble it all up immediately, especially with tech companies favoring rehabilitated older buildings and potential anchor tenant lease expirations coming on a rolling basis.
But many are still making decisions.
Represented by JLL, Skadden Arps will leave 4 Times Square for Brookfield’s first tower at Manhattan West. The building will be ready in 2018 and Brookfield is being represented by a Cushman & Wakefield team.
Bloomberg has opted to extend 189,000 square feet at its namesake tower at 731 Lexington Ave. for five years.
White-shoe law firm Weil Gotshal & Manges signed a 15-year deal for 400,000 square feet at 767 Fifth Ave., with CBRE leasing teams on both sides. The lease starts in 2019 but is for 20 percent less space than it currently occupies in the 50-story tower as all firms are now trying to do more with less.
Amazon also made a major leasing decision, signing with Vornado Realty Trust for 400,000 square feet of offices and a distribution center at 7 W. 34th St., opposite the Empire State Building. Amazon has been represented by Cresa New York. No word yet on whether distribution will be by drone.
While a deal for JPMorgan Chase to relocate to Hudson Yards has been stymied, other tenants are still scouting locations.
Dozens of tenants that have upcoming lease expirations more than four years in the future are in the midst of their strategic planning.
A year ago, there were 20 to 25 potential major anchor tenants in the market.
“Notwithstanding a few having landed, we still have 20-plus companies at various planning stages of their strategic moving,” said Arthur Mirante, principal and tri-state president of Avison Young, who is representing Joseph Moinian in the leasing up of 3 Hudson Boulevard in Hudson Yards.
Among those considering options are News Corp. (which owns The Post), CBS, Wells Fargo, Deutsche Bank, Milbank Tweed, Barclays and Standard & Poors.
Zach Freeman, vice president of leasing for Equity Office, says smaller financial tenants will pay a premium for high-end built space.
“I’m seeing a lot of demand in the financial sector, for sure,” Freeman said.
“Rents are already creeping up and there still seems to be an aversion [by the tenants] to spending capital [on build-outs].”
Tech firms that are being priced out of Midtown South, where rents are heading upwards — from $50 per foot to even $85 or more — are heading to the Financial District and Times Square South.
Andrew Roos, vice chairman of Colliers International, says Brooklyn is also very attractive for less mature companies. “When the music stops,” he posed, “do these areas that are starting to get traction have long-term sustainability?” Which is why he believes buildings near transportation hubs will always have an advantage.
Queens has also been getting more traction as more of its former industrial-loft buildings are being transformed into tech offices and retail spaces.
For millennial-focused companies, “it is all about the arrival,” said David Falk, tri-state president of Newmark Grubb Knight Frank, at a recent Real Estate Board of New York luncheon.
He explained this “arrival” by the tenants is about walking in, and not just about adding bricks to the interior of the space — as one owner suggested in a bid to make his glass-and-steel building a contender.
“Does a TAMI (technology, advertising, media, information) tenant feel comfortable walking into an Emery Roth building where everyone is wearing a suit and tie?” Falk said. His answer: No.
Brokers are also educating their tenants so that if they see something they like, they have to respond quickly.
“It’s not quite bidding wars, but the owners can be a little more picky than they have in the recent past,” said Richard Farley, executive vice president and chief operating officer for Handler Real Estate Services. “You don’t want to dally because the educated tenants are moving fast.”
