Off the avenue: Is Park Avenue losing its edge in the office market?
Park Avenue has for decades been the office district of choice for many of the city’s high-profile–and high-rent–corporations. But a recent Crain’s article points to impending departures–such as the decision of investment firm Black Rock to decamp for new space in Hudson Yards or the World Trade Center, raising the question of whether the avenue’s biggest office zone, from East 45th to East 59th streets, is falling out of favor with big-ticket business tenants.
The city’s office market is, without a doubt, changing. Industries like tech are growing and the financial industry is consolidating and in some cases downsizing its office space. The neighborhood, which charges the city’s highest average rents, has been slow to catch up with the needs of new office tenants.
Foster + Partners’ design for a new 893-foot tower at 425 Park Avenue
Park Avenue’s office buildings, are, for example, over 55 years old on average; many have low ceilings and, in comparison to new towers’ open spaces filled with light and air, are a veritable forest of structural columns. Says David Levinson, chairman and CEO of L&L Holding Company, “Would you buy a 20-year-old computer or a cellphone that is the size of a brick? When you’re breathing filtered air and your electric and phone bills go down because of the better technology and the productivity of your workers goes up because they’re happy, you realize you want to be in new space.” This may be why BlackRock has chosen to let the lease on its 700,000 square feet of office space expire in 2023.
Many of the area’s landlords, however, feel there’s no cause for concern. John Powers, head of Boston Properties’ New York office says big-ticket tenants have moved from Park Avenue in the past. “…the space always gets filled.” For example, art and real estate brokerage Sotheby’s is rumored to be considering a move to 399 Park Avenue when Citibank moves out of its 385,000 square-foot space in the tower next summer.
The in-progress 425 Park Avenue, L&L’s 670,000-square-foot luxury office tower between East 55th and East 56th streets, has snagged the city’s highest-priced lease ever–as much as $300 per square foot–in a deal with hedge fund Citadel. And hip office-sharing company WeWork has leased 300 Park, evidence that the area may well be keeping up with the times.
In fact, some landlords see an opportunity to retool the central business corridor for a new era. The aforementioned 399 Park will be getting $50 million worth of upgrades that include a new metal façade, a roof garden and a new office floor atop a large setback. In the months ahead, the city is expected to revive plans for rezoning midtown east to allow taller office towers, and many area landlords want to keep their options open. Vornado Realty Trust, for example, is putting clauses into its 350 Park Avenue leases that will allow it to clear out the building should they want to demolish it and replace it with a state-of-the-art skyscraper in the future.
[Via Crains]
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