New KPMG Lease Deal at Two Manhattan West Isn’t All Good News

New KPMG Lease Deal at Two Manhattan West Isn’t All Good News

By:  Benyamin Davidsons 

 

A new lease deal inked for commercial space in Manhattan has become the year’s largest deal– but market analysts worry that it points to a troubling trend.

As reported by the NY Post, KPMG has committed to leasing 450,000 square feet at Brookfield Properties’ Two Manhattan West.  The Netherlands-based global audit and consulting firm signed a 20–year lease agreement, closing what is now the largest office lease sealed this year.  The new glassy 935-foot-tall, 58-story skyscraper, on the edge of Hudson Yards, is still undergoing interior construction, and is slated to open up in early 2023.

The tower is part of the total 7 million square feet, 8-acre, 6-building complex, combining modern office space, and luxury residential living designed by Skidmore Owings & Merril.  While Brookfield is celebrating the new large lease agreement, other developers are bracing to lose their tenant.  In all, KPMG will vacate 800,000 square feet of office space in the city, consolidating its operations into the new office tower, for a net smaller space.  The firm currently leases space in Rudin Management’s 345 Park Ave. and 560 Lexington Ave., and in SL Green’s 1350 Sixth Ave. — and plans to move out in 2025, to relocate into Two Manhattan West.

In a similar maneuver, HSBC Bank is moving next year to Tishman Speyer’s 65-story tower in Hudson Yards, entitled The Spiral.  In early May, the financial giant signed on for a 20-year lease taking on 265,000 square feet of space at the new tower.  While it is a big lease, it is similarly a reconciliation of other office space which it will move out of.  “When companies move, attention is rightly called to the exciting new lease the tenant has signed and its new building,” Colp-Haber told Realty Check. “But we need to keep our eye on the big picture, which is to compare the total square footage before and after the move”.

As per the Post, analysts also see a glitter of hope, however.  Although big firms are opting to cut their overall square footage of office space, they are also opting for the newest, best office space available.  This news bodes very well for developers who spent money to upgrade their buildings, or for the new trophy buildings.

It shows that, despite the work-at-home trend, big firms do want a presentable space, and will pay a premium for the amenities offered in Grade A office space.  The new Marquee commercial towers and the upgraded buildings are filling up, leaving the older buildings with the higher vacancy rates. This is also good news for the city’s tax base, which has already been adversely affected by weakening values in commercial real estate.  The big firms that are downsizing are “doing it strategically to be in better buildings. They’re more attractive to talent and more conducive to bringing people back to offices,” said JLL tristate president and chairman Peter Riguardi, who wasn’t involved in the transactions.

KPMG communications director W. Scott Horne commented on the lease deal to say: “Our real estate strategy is centered on creating offices that embody our culture, attracting and retaining the best talent and redefining the workplace experience.”  Horne added, “We short-listed buildings that met these criteria, and Two Manhattan West emerged the unanimous choice.”