Sunday Summary: Park Avenue Never Looked So Good

OK, OK, we’re deliberately leaving out the second half of that question: on Park Avenue?

Still, based on what we’re seeing along the 30.9 million square feet that make up the 38 office buildings of prime Park Avenue, vacancy stands at an enviable 7.4 percent, and the average rent is $109 per square foot, which is $25 per foot higher than in the rest of Manhattan.

“Park Avenue is, I believe, the tightest submarket in the United States,” said Mary Ann Tighe of CBRE (CBRE). “It’s a landlord’s market.”

Four of the 10 largest office leases in the third quarter of this year were along Park Avenue, and owners and developers are giving the older buildings the proverbial Park Avenue facelift:

Fisher Brothers just spent $20 million redeveloping the lobby at 299 Park Avenue, and the Stahl Organization also redid its lobby at 277 Park Avenue. At 200 Park Avenue, the Irvine Company is pumping $200 million into renovations, and SL Green (SLG) is redeveloping 245 Park Avenue. And that’s not even mentioning 350 Park Avenue, the site of Citadel’s future office tower.

Just this week we saw some healthy leasing along Park. At the Seagram Building (which is at 375 Park Avenue), Blue Owl Capital just increased its footprint by 42 percent to a whopping 238,673 square feet. (This, along with the $160 million sale of its Gowanus site, is welcome news for Seagram landlord RFR, which has had other headaches of late.)

And, while Park Avenue’s news seems unusually good, it’s not like it’s the only corridor in New York real estate that has been humming lately.

SL Green, for one, had a very big number to boast about: 924,876.

That’s how much square footage Bloomberg now occupies at the REIT’s 919 Third Avenue following a renewal and expansion. (SL Green has other reasons to be happy, too; take a look at their latest earnings call — they had a very good quarter.)

“[This is] further evidence of really incredible leasing momentum,” said SL Green Chairman Marc Holliday. “This was not really within the expectations at the beginning of this year. It was a very pleasant surprise, and it’s more telling about the strength of this market.”

The momentum is coming from a lot of different quarters, but one that had largely been ignored in the last couple of years has been the tech sector.

We’re not necessarily talking about the Facebooks and Amazons of the world whose plans remain largely unchanged, but rather firms that are a tier or two down, that are starting to lease up space again.

Over the past year, Palantir, Stripe, Ramp, Pinwheel and OpenAI have all taken space in Manhattan (in some cases in excess of 100,000 square feet).

“It’s not just that tech leasing seems to be back,” said Savills’ Gabe Marans. “It’s that the tech leasing that’s coming back is happening at a grassroots level, meaning it’s not being driven by big tech. It’s happening organically.”

Getting in on the action

All this activity might explain why developers such as the legendary Gary Barnett are starting to roll up their sleeves and build in Manhattan again.

Barnett’s Extell Development just purchased the 24-story office tower at 655 Madison Avenue (which was ready to tear down) from Williams Equities for $160 million, with plans to “build something spectacular” on the site — which is a vague enough promise to pique our interest.

Barnett isn’t the only one. RXR and Hudson Bay Capital just secured a $320 million loan to jointly acquire (and recapitalize) the 700,000-square-foot office and retail property at 620 Avenue of the Americas.

But it’s not just the real estate moguls who are getting in on the action. Athletes are, too.

Former boxing great Floyd Mayweather Jr. just plunked down $402 million to buy a 60-building, 1,000-unit affordable housing portfolio in upper Manhattan from Josh Gotlib’s Black Spruce Management.

Plus, sectors of the market that were previously written off are indicating that they’re no longer afraid of office anymore. While WeWork (WE) might be a dirty word for some, the company is still there and is still fixing itself, and new CEO John Santora has found interesting ways to do so.

We learned last week that WeWork is partnering with Vast Coworking Group to make Vast’s 75 locations in the U.S. and Canada bookable for WeWork members.

“The way we look at it is that we need to be where our members need us to be, right?” Santora told Commercial Observer. “So we’re in all the big metropolitan cities around the world with our 500-plus locations. But sometimes some of these smaller suburban markets are key. … As people continue to change how they work and where they work, this provides access [to workspace] closer to home, but yet they can still be in a corporate office.”

And WeWork isn’t the only coworking platform that’s rebounding. The total number of coworking venues actually increased in Manhattan in the third quarter of the year by 4 percent, according to a report from CoworkingCafe. And, while Manhattan’s overall coworking footprint might be down slightly from 2023, the 11.2 million square feet of coworking space makes Manhattan the largest such market in the country.

Oh, and did we mention that Tishman Speyer just completed the largest CMBS deal in the country since 2022 for Rockefeller Center, which they refinanced for $3.5 billion?

Something to think about this Sunday.

See you next week!