Spotify Technology to Vacate Four of Five Floors at 4 WTC

Spotify Technology SA, the streaming company, is planning to vacate five of its floors at Manhattan’s 4 World Trade Center by the end of the year and will seek to sublease them, Bloomberg reported.

The company is among the largest tenants in the 4 WTC tower, with about 564,000 square feet of offices. The space it is aiming to sublease is more than the 86K SF the company took over from the Port Authority of New York and New Jersey when Spotify expanded its footprint in 2018, the report said.

The towers at the WTC, including the landmark 1 World Trade Center, are owned by Silverstein Properties, which took ownership of the buildings shortly before the terrorist attacks on the site on September 11, 2001. Silverstein redeveloped the 16 acre site in the years that followed.

On a recent earnings call, Spotify Chief Executive Officer Daniel Ek said the company is cutting its real estate costs as more of its employees work remotely.

“Our focus has shifted more towards optimizing our current portfolio and reviewing our real estate needs around the world as opposed to significant expansion of our presence in current markets,” the company said in an April filing.

Spotify’s plan adds to the growing number of tech companies subleasing space in Manhattan’s office market. Vacancies reached a record high this year as companies permanently adopted hybrid work schedules. Major tech firms that were driving demand for offices, including Meta Platforms Inc. and Twitter, have cut staff and office footprints.

Manhattan’s office vacancy rate reached a record high in the first quarter of 2023 as leasing activity dropped to its lowest level since the second quarter of 2021, according to a report from JLL.

The vacancy rate toped 16% while office leasing activity totaled 4.6M SF, continuing a slowdown that began at the end of last year.

Exacerbating what JLL called “anemic” results in Q1 were the delivery of more than 1.5M SF of new office space, including the completion of the redevelopment of 660 Fifth Avenue.

The glut of new supply as well as more properties being listed for sublease contributed to negative absorption of minus 1.4M SF in Manhattan in Q1, which pushed the vacancy rate up by 40 basis points.

Average overall rents remained plateaued at about $77 per SF, as Class A direct rents, especially in new construction, increased and balanced out falling rents in Class B and sublease space.

Trophy direct asking rents fell to $103.49 per SF in Q1 from $105.74 in Q4 2022 and Class B direct asking rents held steady at slightly over $62 per SF. Class A direct asking rents rose to $88.54 from $85.09 in Q4 2022.