Vornado Realty Trust is enjoying a landlord’s market.
During Vornado Realty Trust’s third quarter earnings call, CEO Steve Roth said the company expects to lease nearly 3.8 million square feet across its portfolio by the end of this year, which would be the most since 2014, at “the highest average starting rent ever.”
The company leased out more than 2 million square feet across 68 deals during the first nine months of 2024 at an average starting rent of $112 per square foot. This quarter, it leased 454,000 square feet across 18 deals in the New York office market at $92 per square foot.
“The icing on the cake is that there is no sign of additional office supply on the horizon,” Roth said. “There hasn’t been a major new office start in five years. The cost of the building and the cost of capital make it totally uneconomic to build.”
He said Vornado’s properties are competing in the smaller Class A office space, “where demand is strong and vacancies are rapidly evaporating.”
“No new supply always begets a landlord’s market,” he said.
But not everything looks rosy for the company. Michael Franco, its president and chief financial officer, acknowledged that Vornado still has a “handful of assets that are overleveraged.” He said if the debt on these properties cannot be refinanced on good terms, the company will not invest more capital into them, noting that “the non-recourse nature of these loans provides us with this option.” In other words, the company would hand over the keys, as it has already shown a willingness to do.
During Tuesday’s call, Roth noted that the site of the Hotel Pennsylvania, which was demolished last year, is “down to grade and ready for development.” Vornado has floated building a platform on the site, to temporarily use for New York Fashion Week and U.S. Open tennis matches. The company previously planned an office tower on the site.
“I believe this site, in the heart of our Penn District and directly connected to Penn Station, is the single best site available in booming West Side of Manhattan,” Roth said.
What we’re thinking about: Who will Spencer Stuart recruit to fill out Douglas Elliman’s C-suite? Send a note to kathryn@therealdeal.com.
A thing we’ve learned: Kim Darga has been at the city’s Department of Housing Preservation and Development for 17 years. She serves as the deputy commissioner of the development office.
Elsewhere in New York…
— A racoon fell from the ceiling near a Spirit Airlines gate inside LaGuardia Airport’s Marine Air Terminal, Gothamist reports. The creature was captured and released outside the terminal, according to Port Authority. A video circulated on X of the raccoon dangling from a wire hanging from the ceiling before falling to the ground, followed by airline staff scrambling. “This is both the most LaGuardia thing and the most Spirit Airlines thing to happen. Perfect,” wrote X user Kaitlynn Lwoso.
— Voters in Queens reported issues feeding their ballots into voting machines on Tuesday, CBS News reports. The city Board of Elections confirmed that some polling locations encountered problems early Tuesday, but that “corrective measures were undertaken” and “any ballot cast will be counted.”
— ICYMI, Mayor Eric Adams on Saturday declared a drought watch, the City reports. The city’s reservoirs upstate are at about 65.9 percent capacity, compared to a typical 76.6 percent capacity. “Nobody needs to panic, but we really want New Yorkers to start being much more conscientious about how much water to consume on a daily basis and reduce wherever possible,” said Department of Environmental Protection Commissioner Rohit Aggarwala.
Closing Time
Due to Election Day, there were no top closings to report on Tuesday.
New to the Market: The highest price for a residential property hitting the market was $16.5 million for a 6,637-square-foot condominium at 535 West End Avenue on the Upper West Side. R New York has the listing.
Breaking Ground: The largest new building application filed was a proposed 92,849-square-foot, 77-unit, 22-story mixed-use project at 362 Livingston Street in Downtown Brooklyn. Naresh Mahangu of NY Building Associates filed the permits on behalf of Yitzchok Katz of Developing NY State. — Matthew Elo