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Apple is betting big on Midtown: The tech giant has inked a deal to expand its offices at Vornado Realty Trust’s 11 Penn Plaza. In February, the Cupertino, California-based company signed a sublease for 220,000 square feet spanning four floors of the building. At the time, the Art Deco tower had 638,921 square feet available on the 4th through 14th floors as a sublease from Macy’s. Now, Apple has added two additional floors to its lease, bringing its total occupancy to 336,000 square feet. The tech company’s offices will span the ninth through 14th floors. Apple’s sublease is for just six years, according to the source, with the rent in the mid-$60’s per square foot. Representatives for Apple and Vornado did not respond to requests for comment.
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The biggest U.S. tech companies are providing a jolt to the slumbering commercial real-estate business, emerging as major tenants and acquirers of office and other space while many non-tech firms are trying to tear up their leases. Five of the biggest property owners in the tech industry Amazon.com Inc., Facebook Inc., Apple Inc., Google parent Alphabet Inc. and Microsoft Corp. —together occupy around 589 million square feet of U.S. real estate, according to CoStar Group. That is more than all the office space in New York City, or the equivalent to about 220 Empire State Buildings. It marks a fivefold increase from a decade ago. While Facebook, Microsoft and Google have said they would support working from home beyond the pandemic, that hasn’t appeared to have dulled their appetite for warehouses, data centers, retail stores and even more office space. This year alone, the five tech giants have expanded their real-estate footprint by more than a quarter, their fastest rate over the past decade.
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Manhattan’s marquee office market is facing its highest availability rate since 2004 as the fallout from the pandemic continues, according to a report from Colliers. 12.9% of office space in the borough was available in October, the fifth consecutive month that its availability rate increased. Average asking rents dropped to $76.20 per square foot, down from $77.12 in September and from $79.61 in October 2019. Subleased space accounted for 23.9% of Manhattan's total availability, its highest share since 2009. Leasing activity, however, actually did tick up compared to September, increasing from 1.12 million square feet to 1.76 million square feet. But this was still down dramatically from the 3.89 million square feet leased in October 2019.
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U.S. employees started heading back to the office in greater numbers after Labor Day but that pace is stalling now, delivering another blow to economic-recovery hopes in many cities. The recent surge in Covid-19 cases across the country has led to an uptick in Americans resuming work at home after some momentum had been building for returning to the workplace, property analysts said. Floor after floor of empty office space is a source of great frustration for landlords and companies, which have invested millions of dollars in adapting building plans and developing new health protocols to make employees comfortable with a shared location. About a quarter of employees had returned to work as of Nov. 18, according to Kastle Systems, a security firm that monitors access-card swipes in more than 2,500 office buildings in 10 of the largest U.S. cities. That rate is up sharply from an April low of less than 15%, which largely consisted of building-maintenance and essential workers. The office return rate climbed steadily during the summer and early fall, but it has flattened out after reaching a high point of 27% in mid-October, Kastle said. The rate for last week was down even more sharply than in previous weeks but likely reflected the Thanksgiving Day holiday.