Go to: Manhattan’s 10 biggest empty commercial spaces
While the entire commercial real estate scene is struggling, not all of that struggle is created equally. Some of it is coming in the form of giant chunks of empty space, the likes of which have not been seen in Manhattan for decades. Whether through relocations, downsizing or bankruptcies, huge swaths of office space on single city blocks remain unoccupied — creating, in some instances, the urban equivalent of massive dead zones. And the amount of available space is staggering.
Whether through relocations, downsizing or bankruptcies, huge swaths of office space on single city blocks remain unoccupied — creating, in some instances, the urban equivalent of massive dead zones. And the amount of available space is staggering.
This month, for example, when the advertising firm Ogilvy & Mather moves to its new 550,000-square-foot office at 636 11th Avenue, the firm’s old home — 825 Eighth Avenue — will jump up the list of New York buildings with the most empty and available square footage, according to a report issued by Colliers ABR in May. The building has a total of 1.69 million square feet, 709,000 of which will now be available.
The only Manhattan office building with more available space is 11 Times Square, with 1 million square feet empty. But since that building is a new construction and is not yet completely finished, it comes with an asterisk.
“These are big blocks of space, and that is the bad news,” noted David Hoffman, executive managing director at Colliers ABR. “The good news is that we are starting to see a lot more activity — and it is only a matter of time before that manifests into more leasing activity.”
“But,” he added, “it is these large blocks that are pulling the market back.”
Indeed, the 10 buildings that made the Colliers report have a combined 5.5 million square feet of available space. According to Mark Caylor, a research analyst at Colliers, that’s equivalent to seven average sized Class A buildings.
What’s more, the market woes have shown little prejudice, refusing to spare some of New York’s most high-profile buildings.
For example, with 644,000 square feet of empty space, number three on the list is the former New York Times building at 229 West 43rd Street, which the newspaper moved out of in 2007. Meanwhile, the Citigroup Center at 153 East 53rd Street placed tenth on the list, with 330,000 empty square feet. The battered financial services giant Citigroup vacated 18 floors of that building last year.
In many cases these large swaths of empty space are simply the result of bad timing. A number of the anchor tenants, like the New York Times, made decisions to leave their old homes before the economy tanked. The dearth of replacement tenants caused by the economic downturn did the rest.
In 2007, the tobacco giant known as Altria Group sold its 120 Park Avenue headquarters (number five on the list with 440,000 square feet of available space) for about $525 million in anticipation of the firm’s relocation to Richmond, Va.
It was also back in 2007 that the advertising firm Grey Group announced it was moving its headquarters from 777 Third Avenue (number four on the list with 485,000 square feet of available space) to the former Toy Building at 200 Fifth Avenue.
A handful of brokers have the challenge of leasing space in these largely empty buildings. To compound their difficulties, anchor tenants are no longer seeking the amount of space that brokers and landlords have become accustomed to.
And while it stands to reason that these vast spaces would be even more challenging to lease, there are some advantages. Brokers say the amount of available space provides flexibility to cater to the specific needs of prospective tenants.
Peter Turchin, executive vice president of CBRE, which is leasing four buildings on the list, said with so much space on the market, floor sizes and flexibility of buildings takes on added importance. CBRE has been conducting analyses of its buildings to see which amenities are available to draw in big tenants.
“You have to have space in the building that will cater to certain types of tenants,” Turchin said.
Conference rooms, space for trading floors, outside terraces, extra-high ceilings, and interior floor space are all factors being weighed, marketed and in some cases installed to up a building’s competitive advantage, Turchin noted.
And it’s now a market where less might be more as companies downsize.
“You are going to see landlords be a little quicker to dismantle some of these blocks [of space] and make smaller deals,” said Scott Klau, executive vice president and principal at Newmark Knight Frank, which is overseeing the leasing of 3 Columbus Circle (number six on the list).
“I don’t think they are going to pass up on a deal because it is too small. The fundamentals are going to be the same: ‘Don’t break up the blocks.’ But there is no reason not to embrace the smaller deal, because the bigger tenants are moving slower and there are less of them out there.”
Meanwhile, some submarkets have been hit worse than others. A Cushman & Wakefield report noted that Midtown has taken the biggest lumps. In the first quarter of 2009, the total amount of available office space in all Midtown buildings increased by almost 5 million square feet from the year-earlier period. The report also shows that the amount of available contiguous space increased by 66 percent.
But the recession, some analysts say, may also be providing a glimmer of hope for the blocks of space that are currently lying fallow. Within an environment that is allowing for little new construction, these buildings will likely see strong activity when things get better.
Robert Futterman, CEO of Robert K. Futterman & Associates, the firm tasked with leasing the 200,000 square feet of retail space at the former New York Times building, said it’s been a challenging few months, but that he is seeing sparks of activity.
“December, January and February were definitely disconcerting and a lot of tenants are waiting for the bottom,” he said. “But it feels like we have hit it.”