Financial deregulation proposed by the Trump administration could have a positive impact on New York’s real estate market as financial services tenants expand the square footage they lease, Vornado Realty Trust executives said on their fourth-quarter 2016 earnings call this morning.
“Over the past decade, dramatic growth in office sector jobs has been held back by the financial services industry, which shed 3,000 office-using jobs in 2016 and remains 30,000 jobs below the financial services industry in its peak back in 2007,” said David Greenbaum, the president of Vornado’s New York division. “Since the election there has been a marked shift in the mood around financial institutions, and there is reason to believe that we may see an increase in financial services jobs in New York City with positive implications for the real estate market.”
On Feb. 3, President Donald Trump signed an executive order aimed at repealing the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted during the 2008 financial crisis to rein in banks’ risky business practices and protect the consumer they serve. The act enforced strict rules regarding bank capitalization, increased banks’ compliance and reporting standards and introduced the financial services industry watchdog, the Consumer Financial Protection Bureau.
Greenbaum said that the real estate investment trust’s “confidence in the continued vibrancy of New York has never been greater,” and that the administration’s efforts could have “a significant economic impact for the city.”
Several of Vornado’s new and expansion leases are with financial services industry tenants, perhaps speaking to a shift that is already underway, Greenbaum noted. At 888 Seventh Avenue, Hutchin Hill Capital has signed a new lease for 39,600 square feet, as CO reported this afternoon. Lone Star North America signed a 30,000-square-foot expansion lease and Advent Capital leased 23,000 square feet. The property is now 95 percent occupied, Greenbaum said during the call.
The real estate investment trust’s redevelopment at 90 Park Avenue—undergoing a capital improvement program that includes a modernized lobby and upgraded mechanical systems, according to Vornado’s website—has also been attracting financial services tenants. PricewaterhouseCoopers signed a lease for 240,000 square feet in April 2016, and over 400,000 square feet of new transactions—with starting rents of $75.23 per square foot—have been inked at 90 Park Avenue, Greenbaum said, pushing the occupancy to 96 percent. Those keeping PwC company include Gramercy Capital, Aegon Realty and EverBank, and the leasing activity “speaks to the success of the redevelopment program,” Greenbaum said.
As reported by CO last week, Orix USA Corporation, the stateside subsidiary of Japan-based ORIX Corporation, finalized a deal to relocate to Vornado’s 280 Park Avenue. The financial firm will occupy 20,123 square feet on the entire 40th floor of the tower between East 48th and East 49th Streets. Wells Fargo also signed an early renewal and expansion lease for 49,000 square feet the week prior.
“Most of what we’re seeing is net expansion,” said Steven Roth, the founder and chairman of Vornado, on the call. “It speaks to growth in the financial sector.”