SL Green Expects Labor Day Office Return, Despite Delta Variant Concerns
By Anna Staropoli July 22, 2021 6:47 pm
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Companies like Apple have opted to push back their Labor Day return-to-office timelines in light of the Delta COVID variant — a decision that SL Green Realty Corp. believes may not be necessary.
Although New York boasts a 60 percent vaccination rate, the rate amongst the office population may actually be higher than the data indicates, SL Green (SLG) said during its second-quarter earnings call Thursday afternoon. The vaccination rate amongst SL Green employees has surpassed 80 percent, so the landlord still anticipates a post-Labor Day return to the office, according to company executives.
SL Green executives also stressed the importance of thinking long term. While the Delta variant may not pose a safety risk for vaccinated employees, it is still an unknown and creates a challenge in terms of predicting the future.
In fact, the uncertainty surrounding the exact timeline suggests that years — and not quarters — may be a better metric for understanding the company’s trajectory, CEO Marc Holliday said. Holliday reflected on the successes of the past three months while fielding speculation about the company’s immediate future.
“The commentary you’re hearing from us is what you should think about over years to come,” Holliday said, expanding the scope of the company’s future beyond the month-to-month and to a long-term timeline.
This uncertainty makes predictions challenging and bleeds into measures of financial growth. Tenant improvements (TIs), for example, exhibited a downward spike this past quarter, but may go up in the next few months.
“TIs have to be talked about in connection with the rents,” said Steven Durels, SL Green’s executive vice president and director of leasing and real property. “You have to look at the two in tandem.”
As such, the drop-off is not necessarily a pattern for future TIs, but depends on ever-changing factors, including the space in question and the combination of new and renewed leases, Durels said.
With this kind of widespread unpredictability comes flexibility, especially in terms of tenant requests. The company’s executive management team discussed the influx in tenant demands during the Q&A portion of the call. As tenants have requested more amenities, they’ve also asked for greater flexibility regarding lease times — though they may not necessarily get what they’re asking for, Durels noted.
More concrete than any predictions is the timeline for SUMMIT One Vanderbilt, the highly anticipated observatory, opening on Oct. 21st.
“It’s something that we’ve been working on for three years,” Holliday said, “and we fully expect and hope that it’ll become one of the top-performing and most visited experiential attractions in New York City once it opens.”
The observatory will oversee the 77th floor of the record-setting, $3 billion One Vanderbilt, which has found success at a lease rate of 90 percent.
A total of 227,670 square feet of leases were signed this quarter at One Vanderbilt, including both new leases with MSD Partners, Mamoura Diversified Global Holding and Kyndrel, among others, as well as expansion leases with the likes of TD Securities, InTandem Capital Partners and Sagewind Capital.
Anna Staropoli can be reached at astaropoli@commercialobserver.com.
