SL Green Cashes in on Manhattan Office Rebound

With little new office construction on the horizon, tenants are scrambling for the city’s best buildings, and Manhattan’s biggest office landlord is reaping the benefits.

SL Green raised its full-year earnings guidance by $1.20 per share, a more than 26 percent increase. The bump was largely driven by strong Manhattan office leasing, particularly early renewals and tenants snapping up pre-built space, as well as faster tenant move-ins and tighter expense controls, CFO Matt DiLiberto said during a second-quarter earnings call.

The bullish outlook comes as Midtown’s supply of Class A office space continues to tighten, driven by a dearth of new construction, pent-up tenant demand after years of uncertainty and a shrinking inventory as older office buildings are converted to apartments.

“A growing scarcity of premier space in desirable Midtown districts has turned the tables in our favor,” CEO Marc Holliday said during the call. “We now know that we’ll exceed our leasing goals again this year. It’s just a question of whether it’ll be by a wide margin, or a really wide margin.”

The REIT signed 53 Manhattan office leases encompassing 445,000 square feet during the second quarter, and 51 leases covering 929,000 square feet during the first quarter. Holliday attributed the momentum to the city’s “extraordinary, prolonged surge in business activity.”

“Our economy is in a league of its own compared to any other [Central Business District] in the country or indeed even the world, driven by the financial services sector performing as well as I’ve ever seen it,” he said.

The REIT has also benefited from a wave of AI-driven tech leasing, Holliday said, pointing to a recently signed 100,000-square-foot lease by an unnamed “leading artificial intelligence company” at 11 Madison Avenue as evidence of the trend.

SL Green also saw dramatic rent growth across its portfolio, particularly along Park Avenue and Sixth Avenue, DiLiberto said. Asking rents have been rising throughout the year and he predicted the company would post another quarter of strong leasing spreads.

At One Vanderbilt, which is fully leased, the REIT is looking to recapture space from expanding tenants and re-lease it at significantly higher rents. The building has been such a cash machine that SL Green has already recouped its investment, and the profits are now flowing into earnings.

“The city is, I think, experiencing one of the largest resurgences I’ve seen,” Holliday said.

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