SL Green posts worst occupancy drop since pandemic

Manhattan’s largest office landlord is emblematic of the continued struggles of the market, seeing its decrease in occupancy accelerate.

Occupancy across SL Green’s 25 Manhattan buildings dropped to 90.2 percent in the first quarter, Crain’s reported. That was a decline of 280 basis points year-over-year, nearly twice the rate of decline from 2021’s first quarter to 2022’s first quarter.

Shares for the office landlord on Thursday fell 4 percent to nearly $25 per share. The stock is trading at its lowest levels since the previous financial crisis in 2009.

Despite the dive, executives sounded an optimistic note about SL Green’s future. Chief executive Marc Holliday noted during a conference call that the pipeline of expected leasing activity jumped by 70 percent in the first quarter. A spokesperson for the company said it expects occupancy to be back up to 92.4 percent by year’s end.

“Things are coming around in the right direction,” Holliday said during the call.

The company’s forecast comes after a quarter of financial difficulty. Funds from operations declined 7 percent in the first quarter to $105 million, beating Wall Street expectations, but possibly due to recoveries from litigation in a case against retail tenant Victoria’s Secret. Borrowing costs for the company, meanwhile, tripled to $42 million.

Holliday previously aired a sobering message during the company’s investor day in December, when he called the city a “challenging office leasing market” and admitted the hybrid work model persisted far longer than he anticipated.

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Manhattan ended the first quarter with a 16.1 percent office vacancy rate, according to JLL. Only 4.6 million square feet of office space was leased during the quarter.

SL Green made headlines in the first quarter as more details surfaced around its proposal to bring a casino to Times Square. Caesars Entertainment and Jay-Z’s Roc Nation are on board with the proposal, which is competing for one of three gaming licenses expected to be handed out by the state this year.

— Holden Walter-Warner