News.

Weekly Market Report _ March 10, 2022

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Despite calling for return, financial titans shed NYC office space


JPMorgan Chase, New York City’s largest office tenant, cut its commercial footprint by 400,000 square feet last year, Crain’s reported. The bank, which has said it plans to “significantly reduce” its global office footprint in the coming years, also downsized by 300,000 square feet in 2020.The financial institution still rents 8.7 million square feet in the city, according to Crain’s, but an entity of its size — particularly one whose CEO was at the vanguard of the return-to-office movement last year, can create a ripple effect if other firms decide to follow suit. According to Crain’s, Wells Fargo reduced its commercial space in the city by 600,000 square feet last year.


Bank of New York Mellon, financial index provider MSCI and insurance firm Voya Financial are also downsizing their nationwide footprints. But JPMorgan’s actions indicate that it might be hedging its bets. The bank is looking to sublease 700,000 square feet at 4 New York Plaza in the Financial District and 100,000 square feet at its Hudson Yards office at 5 Manhattan West, Bloomberg reported Wednesday. The availability rate, meanwhile, hit 17.4 percent, a 74 percent increase from the start of the pandemic. Average asking rents across the borough are up only slightly from their pandemic lows, at $74.88 per square foot, nearly 6 percent below pre-pandemic levels.


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Tech Companies are Reopening their Offices but Tech Work has Changed Forever


Alphabet’s Google this past week outlined its return-to-work plans: Employees will be returning to the office a few days a week starting in early April. But Alphabet Chief Executive Sundar Pichai told The Wall Street Journal last month that the future of work is flexible and that he sees it as a “new canvas on which we can develop newer ways, which make people’s work life more fulfilling and their personal lives more fulfilling.” Apple Inc. on Friday told employees they would begin returning to the office one day a week starting on April 11th, and would build up to three days per week by late May. And Twitter Inc., which was among the first to announce it would allow its employees to work from anywhere permanently, announced Thursday that it plans to start reopening its offices March 15. But in making the announcement, CEO Parag Agrawal, stressed that the company’s ultimate return-to-work philosophy is employee choice.


Tech companies spent years selling their lavish office campuses full of perks like on-site massages, free food and exercise classes as prime reasons to come work for them. Even though most workers will only go back part time, these spaces will still serve an important purpose, several companies say. The tech sector accounted for 37% of the total square footage of the top 100 office leases signed last year, exceeding its 2019 percentage of 32%. Meta Platforms Inc., the parent company of Facebook, last year signed a lease on Austin’s Sixth Street, adding an additional 589,000 square feet to its existing office space in the city.


Meta currently has 2,000 employees living in Austin and another 500 job openings there, according to Katherine Shappley, head of the company’s Austin office. The company also expanded its office space during the pandemic in New York City, Boston, Chicago and Bellevue, Wash., where there are deep pools of tech talent.


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Eric Adams calls bankers back to offices as city faces mixed recovery


Mayor Eric Adams made an appearance at Goldman Sachs’ headquarters on Monday, Bloomberg reported. The town hall meeting was closed to the press, but Adams planned his visit to tell employees to rely less on remote work and more on in-person operations. Goldman has emerged at the forefront of New York financial institutions welcoming workers back to the offices during the pandemic. The bank was among those giving employees the option to work from home at the beginning of the year as the city coped with a surge of cases linked to the Omicron coronavirus variant.


The focus on the city’s office market has ramped up as authorities ease mask and vaccine restrictions with an eye on encouraging tourists and workers to return. As Adams noted, businesses reliant on office workers have endured struggles during the pandemic. Retail vacancies approached 30 percent by the end of January. The office picture in the city also appears to be trending in the wrong direction. Manhattan office availability last month hit a peak, slightly under 94 million square feet of office space available to rent. The availability rate reached 17.4 percent, up 74 percent from the start of the pandemic.


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Crypto companies rising stars in Manhattan’s office market


Crypto and crypto-adjacent firms are an increasing presence in Manhattan office spaces, the Commercial Observer reported. The companies are prime customers for spaces that are efficient, clean, accessible around the clock and come equipped with high-speed, redundant and wireless fiber connection. Christopher Okada, founder & CEO of family-owned real estate advisory and investment firm Okada & Company, told the Observer the most active areas for leasing by these companies are in the 10016 and 10010 zip codes, encompassing the East 20s and 30s. Okada noted that many crypto companies appear to be moving away from coworking spaces. While some companies are looking for traditional office space, smaller ones are eschewing the costs of the temporary spaces to stay at home and work remotely instead.


Late last year, cryptocurrency data and transaction company Chainalysis agreed to lease more than 77,000 square feet at L&L Holding Company’s 114 Fifth Avenue. The company previously subleased space about half the size, but converted the deal into a direct lease and added two additional floors. Cryptocurrency exchange platform Coinbase also recently inked a deal to open its first office in New York City, agreeing to sublease 30,000 square feet from Point72 Asset Management’s 339,000-square-foot space at Related Companies’ 55 Hudson Yards.


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Hermès takes 3 floors at 550 Madison for its U.S. HQ


Hermès has signed a lease to take three floors of office space at 550 Madison Ave., a landmarked Midtown tower that's currently being redeveloped.The French luxury design house is the second tenant to sign on at the building, after property and casualty insurance firm Chubb (NYSE: CB) signed a lease for 10 floors and 240,000 square feet in November. With the deal, 13 floors at the 41-story building have been snatched up. Hermès will occupy nearly 72,000 square feet of office space across the full 23rd, 24th and 25th floors. Hermès will use the location as its U.S. headquarters.


The Olayan Group and RXR have been working on the redevelopment of 550 Madison Ave., which was originally built in 1984 as the headquarters for AT&T. The developers in September unveiled the first part of the project: a new lobby designed by Gensler, featuring a large-scale art commission by Alicja Kwade called "Solid Sky." That lobby now offers a view straight through from the entrance back to a new public garden designed by Snøhetta.Olayan's plan for the property is to reimagine it as a multi-tenant office space, keeping its Chippendale top while increasing its capacity and nearly doubling the public open space at the site.