It rises 1,401 feet over midtown Manhattan like a monument to another time — a shiny new skyscraper commissioned long before the world had ever heard of Covid-19.
Donning masks, the developers cut the ribbon at One Vanderbilt in September, six months into the pandemic that has emptied offices across New York. Now what once seemed like a grand play by its developer, SL Green Realty Corp., stands in stark contrast to the growing angst inside the city's office market.
Even with roughly 70% of One Vanderbilt leased — most of that before the coronavirus struck — shares of SL Green, the biggest office landlord in New York, are down about 30% since March. To some, that decline merely hints at the pain yet to come for the entire industry, its investors and its lenders given the head-snapping drop in demand and lease signings across the city.
The 427-meter One Vanderbilt is but one piece of a decade-long building boom that's contributed to a heavily supplied office market even before Covid-19 hit. Eight months into the pandemic, uncertainty about companies' commitments to having lots of employees in physical offices has sent shares of New York office landlords tumbling this year, some losing more than half their value.
Then, on Nov. 9, the market may have offered a glimpse of a possible post-pandemic future in which employees returned to offices. After Pfizer Inc. announced its Covid-19 vaccine stopped 90% of cases in a study, shares of office landlords Vornado Realty Trust, SL Green and Empire State Realty Trust Inc. surged more than 35%. All three rose today, led by Empire State at 7% and SL Green at 5.3%.
The number of workers who went to the office in 10 of the largest U.S. business districts was down 26.4% from pre-pandemic levels in the week ended Nov. 4, according to data from Kastle Systems. The metro area encompassing New York and Newark and Jersey City, New Jersey, had the lowest figure, at 14.3%.
More than 13% of the 454 million square feet of office space in Manhattan was available for rent in the third quarter, with a big increase in new sublease space, which saw the biggest quarterly gain since the global financial crisis, according to brokerage Savills Plc.
"The sublease inventory is growing and this is going to create a definite market correction and slow down the velocity of leasing," said Peter Riguardi, chairman and president of the New York, New Jersey and Connecticut region at Jones Lang LaSalle. "It's very challenging."
Offices, which tend to have longer leases, have held up better than the retail and hotel industries, which have seen defaults and bankruptcies surge thanks to lockdown measures. Rent collections for office tenants were hovering around 95% for the biggest public landlords in the city as of the third quarter.
Major tech tenants including Facebook Inc. and TikTok signed big leases in the city even after the pandemic started, a signal that not all companies are retreating.