Facebook Grows Again at Vornado’s 770 Broadway [Updated]
REIT discusses Aetna's failed Chelsea move, "Penn One" rebranding on 4Q earnings call
Facebook has again increased its presence at 770 Broadway after taking an additional 78,000 square feet of space at the Noho office building, landlord Vornado Realty Trust (VNO) announced on its fourth quarter earnings call today.
The social media giant signed a lease last week for the entire third floor at the 15-story, 1.16-million-square-foot property between East Eighth and East Ninth Streets. The deal grows Facebook’s total footprint at the building to 513,000 square feet, Vornado Chairman and Chief Executive Officer Steven Roth said on the earnings call.
The space was made available for Facebook after Vornado bought Kmart out of its lease on the floor, which Roth said had 18 years remaining at rents of $33.50 per square foot. Kmart still has 82,000 square feet at 770 Broadway, including most of the property’s ground-floor retail space.
Asking rent and length of lease in the Facebook deal were not disclosed. Vornado’s Josh Glick and Edward Riguardi handle leasing at 770 Broadway in-house, while Facebook’s broker representation was not immediately clear. Representatives for Facebook did not immediately return a request for comment.
After inking a lease for around 100,000 square feet at the Noho building in 2013, Facebook has continuously expanded its presence at 770 Broadway in recent years—exercising an option for an additional 60,000 square feet in 2014, adding the entire 80,000-square-foot top floor in 2015 and tacking on another 80,000 square feet in 2016.
The property also houses another major digital media corporation: Verizon subsidiary Oath, the umbrella company that oversees AOL and Yahoo in the wake of Verizon’s separate acquisitions of the internet brands in 2015 and 2017, respectively. Oath is the second-largest tenant at 770 Broadway with roughly 308,000 square feet of space.
Roth and David Greenbaum, president of Vornado’s New York division, also provided additional commentary on the real estate investment trust’s operations and the Manhattan office market at large. Roth noted that Google (GOOGL)’s reported $2.4 billion acquisition of Chelsea Market at 75 Ninth Avenue “further validates New York as a talent center” for major companies while also affirming “the importance of the West Side” as an emerging office market.
Vornado once again expressed its belief that the Manhattan office market “continues to tilt to the south and the west” of the island, with Greenbaum noting that rents in West Chelsea have increased to levels “well above rents on Park Avenue.” While Aetna’s planned relocation of its corporate headquarters to Vornado’s new 170,000-square-foot office development at 61 Ninth Avenue in Chelsea has now fallen through in the wake of CVS Health’s $69 billion acquisition of the health insurer, Greenbaum said Aetna’s 145,000-square-foot lease is “a fully-binding obligation” and that the tenant “intends to sublease the space” upon receiving it in the second quarter of this year.
Vornado leased nearly 1.9 million square feet of office space across 139 separate transactions in 2017, with those deals booked at an average starting rent of $79 per square foot. At the 57-story, 2.7-million-square-foot 1 Penn Plaza, the REIT achieved a record average starting rent of $69 per square foot in advance of a major redevelopment, commencing later this year, that will see the officer tower rebranded as Penn One.
Discussing the broader market, Greenbaum described 2017 as “a breakthrough year” for the financial services sector, which in recent years has lagged behind the technology, advertising, media and information (TAMI) sector in terms of job creation that fuels office leasing and use. Financial services employment in New York City grew by 13,000 jobs last year—the “largest annual increase in a decade,” Greenbaum said—and hit its highest level since 2000.
He added that much of that financial sector job growth came in the form of “fintech,” or financial technology, positions—with Vornado of the view that the tech market in New York “remains strong” and that reported declines in TAMI sector employment will be offset by more tech jobs in “traditional” industries.