NYU to Master Lease Vornado’s 770 Broadway
The company projects it will sign its highest amount of leases in 10 years.
Vornado Realty Trust sees multiple fundamentals trending positive in Manhattan’s office sector. One of them is leasing, which is at the “foothills of recovery,” the company’s CEO Steven Roth told analysts on a third-quarter conference call.
Through the first three quarters, leasing has reached 23.1 million square feet and is on track to exceed 30 million square feet for the first time in a half-decade, according to Vornado.
Of the year-to-date office space Vornado has leased this year, 2.1 million of the 2.5 million was in Manhattan. In addition, the New York-based REIT has secured New York University’s agreement to master lease the 1.1 million-square-foot office portion of 770 Broadway, with an option to purchase the space in the future
“Activity is robust, and I am confident that we will sign between 3.5 million and 3.8 million square feet of leases this year, which would rank number two in our history,” Roth said. That would mark the company’s highest total since 2014.
The real estate investment trust is seeing the activity leading to strong tenant demand and a drop in vacancies for the office sector. This is particularly true with Class A assets, where it competed with 180 million square feet of space in Manhattan.
“Looking at Park Avenue and Sixth Avenue now with 7% to 9% Class A vacancy, which is the very definition of a landlord’s market,” Roth said.
“And the icing on the cake is that there is no sign of additional supply on the horizon. There hasn’t been a major new office start in five years.”
Also, Roth added that the REIT’s rents have been rapidly increasing. In fact, he said Park Avenue prices have shot up to $130 a foot from $80 a foot “almost overnight,” attributing this trend to low supply.
Roth does not see any signs of a recession, even as the Federal Reserve cut interest rates for the first time in four years in September.
“There has been a soft landing,” he noted.
“So most of our customers are enthusiastic about their space and they want more and better space.”
On the acquisition front, Roth said Vornado will keep an open mind to “good assets at distressed prices.”