Wall Street office blocks emptying as high-profile tenants head for the exits

The Durst Organisation and Silverstein Properties, both landlords at the World Trade Centre complex, argue their available space is more competitive because the towers are newer and higher quality than others in the area.

One World Trade is 90 per cent leased and asking rents are at $US75 a square foot with regular tenant improvement concessions and free rent, said Eric Engelhardt, senior managing director of commercial leasing at Durst.

“What’s happening in this market and in other downturns in the real estate market is flight to quality,” Engelhardt said. “Tenants in this market, especially post-pandemic, are looking for healthier, newer, inspired spaces to encourage their staff to return to the office.”

In the Financial District, one building taking a hit is 40 Wall Street, the 72-storey skyscraper owned by former president Donald Trump. Revenue fell at the building in 2020 as tenants looked to exit leases due to pandemic-related office closures.

The office tower, where construction started in 1929, has also been tarnished by the Trump brand. The Girl Scouts’ New York City chapter has been exploring options to leave the building as it looks to distance itself from Trump after the deadly riot at the US Capitol.

A spokesman for the Trump Organisation said two new leases were recently signed at the building, which is more than 90 per cent leased.

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Still, the surge in office supply is putting pressure on landlords. Average asking rents in lower Manhattan fell to $USUS61.59 a square foot in February, the lowest since 2016, according to the brokerage firm Colliers. The prices for subleases are often lower, ranging from $US30 to $US60, CoStar data show.

Concessions are rising, including more rent-free months on shorter leases and growing allowances for improvements. Incentives are also ramping up for brokers, with landlords offering free Amex and Visa gift cards just to get their spaces shown.

“There’s been a disruption clearly throughout Manhattan and downtown is not insulated from that,” said Jim Wenk, a vice chairman at Savills North America. “It’s going to be a very choppy period for the foreseeable future.”

Bloomberg