Office landlords pile on incentives, but not without paying the price

New York /
Oct.October 28, 2009 11:01 AM

Office building owners, who were insulated from the downturn at first because of long-term leases, are now slashing rents and piling on incentives to retain tenants whose contracts are up. At Boston Properties’ GM Building in Manhattan, new tenants are paying 17 percent less in gross rents than former tenants did for office space there. SL Green Realty, which owns dozens of Manhattan properties including 100 Park Avenue and 1515 Broadway, offered 6.9 months of free rent and doubled its construction allowance for new lease signers during the third quarter. Sweet tenant deals come with a hefty price tag for owners, though. SL Green’s funds from operations dropped 28 percent in the third quarter year-over-year. According to SL Green CEO Marc Holliday, the large inventory of cheaper sublease space available has been a major contributing factor to declining rents and the need for incentives. Once that inventory is absorbed, he expects the office leasing market to improve. [WSJ]


Related Articles

arrow_forward_ios
The Daily News Building at 220 East 42nd Street and SL Green CEO Marc Holliday (Credit: Getty Images)
SL Green puts Daily News building up for sale
SL Green puts Daily News building up for sale
SL Green snags private-equity firm at One Vanderbilt
SL Green snags private-equity firm at One Vanderbilt
SL Green snags private-equity firm at One Vanderbilt
SL Green’s locks in big bank lease at Hudson Yards redevelopment site
SL Green’s locks in big bank lease at
Hudson Yards redevelopment site
SL Green’s locks in big bank lease at
Hudson Yards redevelopment site
An aerial of 341-347 Madison Avenue and Boston Properties CEO Owen D. Thomas (Google Maps, Real Estate Roundtable)
Boston Properties moves forward with teardown of ex-MTA HQ
Boston Properties moves forward with teardown of ex-MTA HQ
Under Armour CEO Patrik Frisk and the GM Building (Getty, Google Maps, Cushman & Wakefield)
Under Armour to sublease planned Fifth Avenue flagship
Under Armour to sublease planned Fifth Avenue flagship
106 Spring Street with SL Green's Marc Holliday of SL Green and Paceline Equity Partners' Sam Loughlin (Google Maps, iStock)
One of Soho’s priciest retail spaces sells at UCC foreclosure auction
One of Soho’s priciest retail spaces sells at UCC foreclosure auction
SL Green's Marc Holliday and Brookfield Asset Management's Bruce Flatt with Tower 46. (SL Green, Brookfield)
SL Green to sell its 25% stake in Tower 46 to Brookfield
SL Green to sell its 25% stake in Tower 46 to Brookfield
SL Green CEO Marc Holliday with 11 Madison Avenue and 100 Park Avenue (SL Green, Google Maps/Illustration by Alexis Manrodt for The Real Deal)
SL Green sees improved “market vibe,” office return in “a blink of an eye”
SL Green sees improved “market vibe,” office return in “a blink of an eye”
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...