New York’s office market is still trying to find its footing after the pandemic crushed it. While some newer buildings are attracting tenants anew, older buildings are being forgotten.
The stretch along Third Avenue from 42nd Street to 59th Street is becoming a stark example of the downside to the city’s ongoing flight to quality, Bloomberg reported. While Savills pins the city’s office vacancy rate at 19 percent, it’s 29 percent on the 17-block corridor — nearly doubled in the last four years.
A glaring issue is the area’s lack of new or refurbished buildings. Many of the properties were built between the 1950s and 1980s and feature no meaningful updates since their construction. As employers try to pull out all the stops to lure back their workers, companies are casting their eyes to newer buildings on Park or Madison Avenues, or on the Far West Side.
Savills vice chairman Nick Farmakis told the outlet waning interest has demoted Third Avenue to “leave-behind space.”
The future prospects of many of those properties don’t look good. At 655 Third Avenue, the availability rate jumped from 5 percent in 2017’s first quarter to 47.5 percent in this year’s second quarter. The building also scored very low in architectural firm Gensler’s analysis of possible residential conversions.
Other buildings in the neighborhood are on the verge of losing significant tenants, or are about to have loans mature without a stable base of income to make those payments. Residential conversions are being considered in the neighborhood, but zoning laws and physical details like floor plates complicate that possibility.
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Third Avenue isn’t out on an island. An analysis published earlier this year from NYU’s Arpit Gupta and Columbia University’s Vrinda Mittal and Stijn Van Nieuwerburgh determined the city’s office stock would decline in value by 28 percent by 2029, overcome by the spread of remote work.
Still, there are some trying to save the corridor by giving new life to their properties on Third Avenue. The Durst Organization has spent $150 million renovating 825 Third Avenue, which saw its availability rate soar past 90 percent after Advance Publications left in 2019. /
The updated building is set to reopen its doors next month. Durst has signed three tenants to the renovated property, spanning 45,000 square feet of leases.
— Holden Walter-Warner