Fifth Avenue’s Office Market Could Pull Even With Neighbors Park and Sixth

Manhattan’s Fifth Avenue is known for luxury shops such as Prada and Hermes as well as landmarks like St. Patrick’s Cathedral and the New York Public Library’s flagship building. During the holiday season, it’s the place to be.

But as an office corridor, Fifth Avenue has been strangely second-rate. When New York’s premier office tenants flew to quality after the pandemic, they flew to Sixth Avenue (aka Avenue of the Americas), or they flew to Park Avenue, or they drew together in formation and flocked several blocks west to the new Hudson Yards. 

Rents tell the tale. According to research firm CompStak, effective rents in the second quarter along Fifth Avenue from the Empire State Building at 34th Street north to East 60th Street averaged $65.40 a square foot. (Just a quarter before, the average for the Fifth Avenue corridor was $56.82.) That’s well below the average rent of $84.28 for Sixth Avenue, including Rockefeller Center; $88.05 for Park Avenue, from Grand Central Terminal to East 60th Street; and $106 for Hudson Yards. 

Maybe Fifth’s fortunes are changing, though. 

There may be an interest among companies to locate on that most New York of arteries, home to the Plaza and the St. Regis hotels, the one that gets sung about in Irving Berlin’s “Easter Parade,” the one where Donald Trump says if he shot somebody, he wouldn’t lose any votes — and whose Trump Tower is along the boulevard.

Certainly, the anecdotal evidence — a parade of sizable and otherwise notable office leases —  supports the notion that the number of real estate deals on Fifth is rising. Plus, Gary Barnett’s Extell Development — the firm responsible for, among other spires, the Central Park Tower, one of the soaring condos along Billionaires’ Row — is planning a 29-story skyscraper at 570 Fifth Avenue, between 46th and 47th streets. The 1.4 million-square-foot project, for which Extell filed plans in September, would house a two-story Ikea showroom, plus offices for some as-yet-unknown tenants. Such a project would help to solidify the notion that Fifth is a good place to be, especially if the offices get leased.

In addition to the Extell project, there’s London-based private equity firm 17Capital’s September decision to leave the 2-year-old skyscraper at One Vanderbilt, across the street from Grand Central Terminal, and move operations to 452 Fifth Avenue, which is changing its name to 10 Bryant Park. It was long known as the HSBC Tower after its anchor tenant HSBC Bank, which is leaving next year for Hudson Yards.

The 17Capital deal, which JLL (JLL) brokered, reflects what’s going on, said Joe Messina, a vice chairman in JLL’s New York office. 

“Think about it,” he said. “It’s right on Fifth. It’s right on the park. It’s a vibrant area with restaurants and amenities, as well as the park itself. That is what people want.”

Then there’s hedge fund Christofferson, Robb & Company’s decision last month to take 18,800 square feet plus a private terrace at Josef Buchmann’s 680 Fifth Avenue. The 27-story tower near the Museum of Modern Art had an asking rent for that space in the high $80s a square foot. And the venture capital company Loeb Enterprises renewed its lease of the entire seventh floor of the Paramount Group’s 712 Fifth Avenue, also last month. In a smaller deal a couple of months earlier, New Zealand investment firm Morrison leased 8,000 square feet at Tishman Speyer’s 600 Fifth Avenue. 

These deals and plans for sites along Fifth may be good news for the broader Midtown market as well, as it indicates growth spilling beyond just pockets of success like Park Avenue, Avenue of the Americas and Hudson Yards. The Midtown office market, after all, totals about 240 million square feet, making it the largest in the U.S. It might also mean that interest in working from home or from a location close to home has crested, and companies are succeeding at getting their employees into the office for at least a good chunk of the workweek.

The spillover effect manifests itself, too, in the number of sizable leases. While Park Avenue generated 25 leases of greater than 10,000 square feet in the 12 months ending Sept. 30, Fifth generated 27 leases of that size, according to data from Savills. (Admittedly, the Fifth Avenue leases totaled 793,000 square feet to Park’s 1.7 million.) 

“There’s that spillover demand that you’re going to see on Madison, that you’re going to see on Fifth,” Messina said. “People that want to be in that Midtown core close to Grand Central.”

J.P. Morgan Chase’s new headquarters tower is slated to open next year at 270 Park Avenue, and Messina projected it will generate a spillover effect that will help towers nearby, which will in turn help Fifth, and likely even Madison and Lexington avenues. Fifth has been attractive to financial services firms, companies that provide professional and business services, plus  technology, advertising, media and information tenants (or TAMI, in commercial real estate parlance), said a Savills spokesman.

Fifth has long been known for its retail, with the corridor north of St. Patrick’s on 50th Street hosting some of the world’s most expensive stores, including Gucci, Prada, Hermes and Bergdorf Goodman. Affluent tourists from all over the globe make a point of stopping in those stores as part of their sightseeing. Such galivanting might get that much easier under a city-led plan announced last week to make Fifth much more pedestrian friendly, including expanding sidewalk space 46 percent. Construction is slated to start in 2028. 

South of the cathedral, the retail continues all the way down to 42nd Street, though it tends to be somewhat less expensive than the ultra-chic neighborhood to the north. Asked whether the dichotomy is replicated in the avenue’s offices, Messina said, “Not really.” The office market reflects its mass transit connections, meaning the closer you get to Grand Central, which offers direct commuter rail connections with the city’s northern suburbs (and, since early 2023, Long Island), the more in-
demand the offices are going to be, he said. Many offices in that area of Fifth Avenue also have sought-after amenities.

“If you’re in new construction, or newly redeveloped, that’s what people are gravitating toward,” Messina said.

Otherwise, Fifth Avenue office can be a coin toss. 

“Fifth has always been the kind of avenue that could go either way,” said Michael Cohen, tri-state president at brokerage Colliers (CIGI). “Historically, you had Class A buildings on Fifth, like 767, and you had boutique office buildings — 712 Fifth Avenue, 745 Fifth Avenue. Then you had buildings that are part of the Diamond District. It is a hodgepodge.”

Brookfield Properties is “proving” that a historically troubled tower on Fifth Avenue — in this case, what was once known as 666 Fifth — can be made over as 660 Fifth and become popular, Cohen said. “There’s plenty of evidence of premium pricing on Fifth Avenue,” he added.

660 Fifth might be seen as a microcosm for what has been happening on the avenue. According to Cohen, after Brookfield took over the building in 2018 in a deal valued at $1.6 billion, it went through a $400 million renovation in which it was stripped down to its steel and reclad in a more modern facade. The market has since treated it as “a new building,” Cohen said.

Asking rents at the tower are above $100 a square foot, he said, and with a large lease pending, it should be close to fully leased by year’s end.

“It can’t be lumped into the 666 of old,” Cohen said. “It’s in the same category as One Vanderbilt and Hudson Yards.”