Leasing executives at the Durst Organization say that Bank of America’s decision late last week to reduce its office footprint in midtown won’t create a pocket of vacancy in the landlord’s office portfolio.
But the company isn’t taking any chances. Tom Bow, the Durst Organization’s director of leasing, said that the firm will invest $18 million into renovating 114 West 47th Street, a 26-story, 660,000-square-foot property, where it will have as much as 300,000 square feet of space to lease in the coming years.
The Durst Organization has hired the building’s original architect, FX Fowle, to update the lobby. Work will also be done to renovate common space such as corridors and bathrooms.
“We’re going to be lightening up the entryway to the lobby, giving it a newer, fresher look,” Mr. Bow said. “Most of the stones and finishes will remain, but we’re going to have a new turnstyle and security desks. We’re going to enhance what is already there. The building has great bones, this is a corporate headquarters building.”
As The Commercial Observer reported, Bank of America on Friday signed a new lease at 114 West 47th Street that will significantly reduce the bank’s presence in the Durst-owned building.
The Durst Organization developed the property in the late 1980s for the U.S. Trust Corporation, a company that Bank of America acquired in 2007, and continues to own and operate the building. It hasn’t had to think much about deals at the location in recent years; U.S. Trust signed a 25-year lease when it took possession of nearly the entire building in 1989.
Last week however, Bank of America renewed for only a portion of that, slimming down to 360,000 square feet at the 26-story tower. According to Mr. Bow, Bank of America will give up about 170,000 square feet in
the renewal and the Durst Organization could have as much as 300,000 square feet of vacancy to lease at the property in the coming years.
Mr. Bow said the bank’s decision wasn’t a surprise to the Durst Organization. In recent years it had subleased portions of its space, he said, a sign that it no longer needed all of its square footage there.
In re-leasing the property, the Durst Organization would appear to have timing on its side. Bank of America doesn’t give back space until 2014, a timeframe that could allow the Durst Organization to benefit if the city’s office market continues to tighten.
In 2011, the city’s office market showed strong signs of improvement, with leasing activity at the highest level in a decade according to data released yesterday by the real estate services firm Cushman &
Wakefield. Josh Kuriloff, an executive with Cushman & Wakefield, even predicted that the market for space could be constrained within 24 months and that rents could rise dramatically as a result.
In its renewal, Bank of America committed to floors 3-15 at 114 West 47th Street, leaving the Durst Organization with floors 17-26, a more desireable block to lease because it’s the top half of the building
where tenants will enjoy better views and other benefits that come with height such as light and air.
“We like to lease buildings from the bottom up,” Mr. Bow said. “Our first priority in leasing this property was to get a deal done with Bank of America and now that that is done we’re moving onto the next step, which is focusing on the remaining space.”
The company doesn’t just have space to worry about at 114 West 47th Street. At 205 East 42nd Street, another midtown tower the organization owns, it also has a large block of empty space that it is trying to lease.
“Our vacancy rate has been in the neighborhood of 1.5 percent portfolio-wide and it will remain that way,” Mr. Bow said.
The Durst Organization owns several properties in the city and is considered one of Manhattan’s premiere landlords, with trophy assets such as Four Times Square, One Bryant Park and One World Trade Center in its portfolio.