The bell is ringing, announcing the return of a landlord’s market. Midtown vacancy rates are now single digit.(2) A handful of new-builds are finishing up and there is no new supply on the short-term horizon. Replacement cost is the big story in New York. For a theoretical new tower in midtown (an oxymoron, since it’s almost impossible to find a site in midtown), replacement cost would be well over $800 per square foot,(3) which would translate to a triple digit full service rent.

For David Greenbaum who oversees Vornado’s New York office business (where each asset is worth between $100 million to over $1 billion), leasing, management, staffing, lobby upgrades, etc. are day-to-day fare. He also has ultimate oversight and P & L responsibility for BMS, our 1,300 person strong cleaning and security company; PowerSpace, our shared office business; etc.

 

David also oversees the two prominent condo conversion projects acquired this year at 220 Central Park South and 40 East 66th Street.

David, together with myself, leads our effort to develop the Farley Post Office Building,(4) which occupies the double super block between 31st and 33rd Streets from 8th to 9th Avenues, into the Moynihan Train Station. We aspire to expand this project to incorporate the adjacent super block (currently Penn Station, our Two Penn Plaza and Madison Square Garden) into a 7.0 million square foot mixed-use development—5.5 million square feet of newbuilds plus our existing 1.5 million square foot Two Penn Plaza. Vornado assets surround this project—One Penn Plaza, Two Penn Plaza, 11 Penn Plaza and Hotel Penn. Whatever happens, our 6 million square feet here will benefit enormously.



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(2) There are only four office markets in the U.S. with vacancy rates in single digits. They are Midtown New York, Washington, DC, Orange County, CA and Bellevue, WA. It is not by chance that Vornado’s office business is concentrated in New York and Washington, DC, the two best office markets in the country.
(3) A couple of us were gabbing with Eli recently, estimating that today it would cost at least $250 million more to replicate 731 Lexington Avenue, a tower we completed less than a year ago.
(4) Vornado and a partner, The Related Companies (developer of the Time Warner Center), have been designated the Developer of the Farley Post Office Building.