Weekly Market Report - October 1, 2026
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Rents at a Plaza District office tower have doubled in 18 months, reflecting high demand for premium Manhattan office space post-pandemic. Developer BXP reported asking rents for top floors at 510 Madison Ave. have surged to $200 per square foot, up from $100 to $130 last year. BXP CEO Owen Thomas informed investors about leasing momentum in New York and San Francisco, with development projects exceeding expectations despite rising interest rates and potential AI-related economic slowdowns. BXP, with a portfolio exceeding 50 million square feet, includes notable properties like the GM Building and a $2 billion tower near Grand Central Terminal, which is nearly 70% leased before its opening.
Despite robust demand, BXP's stock has declined nearly 20% over the past year, similar to competitors SL Green and Vornado Realty Trust, suggesting investor skepticism about the future of Manhattan office market dynamics and the impact of interest rates. Overall, the Manhattan office market is experiencing strong demand, with the least available space since September 2020. BXP acquired 510 Madison in 2010 for $287 million, originally built without a primary tenant. The building features column-free workspaces, high ceilings, and Central Park views, housing tenants like Paris-based Capital Fund Management.
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Rising interest rates have negatively impacted the stock prices of major New York real estate developers like SL Green and BXP, which have seen around a 20% decline over the past year. However, analyst Alexander Goldfarb from Piper Sandler suggests that these higher rates may benefit developers in the long run. Since rising rates increase construction costs, fewer new office towers are being built, which may help stabilize office rents for years to come.
The drop in development pipelines for industrial, retail, and office sectors is unprecedented, and as long as job availability remains steady, office rents are likely to trend upwards. Manhattan's office rents have shown remarkable growth in 2026, with spaces in sought-after locations commanding rates as high as $340 per square foot. While there are a few new office projects underway that won't be completed until 2029 or later, the overall supply remains low, with no new towers expected to be delivered this year. The anticipated scarcity of new office space bodes well for rent prices in a tight market.
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A historic rental building on the Upper West Side has been sold for more than double its price from two years ago. Alchemy Ventures sold the six-story limestone building at 310 W. 80th St. for $24.8 million, significantly higher than the $11.3 million it paid in 2024. The sale was signed by Samuel Kooris of Alchemy Ventures. The buyer, Phoenix Co., a Japanese corporation linked to ICS America and represented by attorney Paul Petras, is part of a wave of investments from Japanese firms in Manhattan real estate. Notable recent transactions include Shinko purchasing a property at 245 Eldridge St. for $24 million and Hanshin Juken acquiring a building at 212 Lafayette St. for $18 million. The 23,000-square-foot property, built in the early 1900s, housed 36 units, with no current vacancies. The last one-bedroom rental was $4,500 earlier this month, according to StreetEasy. This sale highlights the continuing interest of foreign investors in New York City's real estate market.
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A midtown project to convert an office tower at 355 Lexington Ave into residential housing has received $175 million in financing. Developer Rudin secured a $139 million building loan and a $35.8 million project loan from JPMorganChase, with EVP Christopher Flynn signing the documents. Permits were filed last year to increase the tower's height to 26 stories, covering about 280,000 square feet, with plans for 297 apartments, including both market rate and affordable units, alongside retail space on the ground floor. A Rudin spokesperson emphasized the significance of the financing for the conversion.
Located near the former Pfizer headquarters—currently undergoing a paused residential conversion—the building's renovation comes amid ongoing scrutiny of similar projects in the area due to a past structural failure at Pfizer's site. Recent developments include a $219 million loan for BLDG and David Werner Real Estate’s conversion of 100 Wall St., and a joint venture between Capstone Equities and BH3 Fund Advisors securing $208 million for 141 Willoughby St. in Brooklyn. This continuing trend in office-to-residential conversions highlights evolving market dynamics, despite the challenges faced by certain projects like the Pfizer building.
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Distyl AI, an AI firm assisting Fortune 500 and large companies in improving efficiency, has expanded its Manhattan presence by leasing the ninth floor of its NoMad building, increasing its total occupancy to 30,076 square feet. Last year, it secured a 15,038-square-foot lease for the entire tenth floor at 135 Madison Ave. Both leases extend until January 2028, with the new floor's asking rent at $55 per square foot, up from $52 for the initial lease.
This 13-story building, constructed in 1911, is situated between East 31st and East 32nd streets. Founded in 2022 by former Palantir engineers Arjun Prakash and Derek Ho, Distyl AI recently achieved a $175 million funding round, boasting a $1.8 billion valuation. The building currently houses other tenants like Courier Health, WeWork, and Blender Workspace. The expansion aligns with a trend of AI companies increasing their presence in Manhattan, including Inspiren and Normal Commuting, contributing to substantial leasing activity in the area.
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Restaurateur KwangHo Lee is establishing three Japanese fine dining restaurants in The Durst Organization’s Bank of America tower, called One Bryant Park. These eateries will use a 10,000-square-foot, bi-level space at 135 W. 42nd St., previously occupied by Charlie Palmer Steak, with an opening expected on Oct. 15. Lee emphasizes that each restaurant is led by a chef with a unique vision: Tadaaki Ishizaki oversees One Bryant Park with a 45-seat dining room and 15-seat bar, Yoshihiko Kousaka’s Kumiko Room features a 14-seat sushi counter and 20 additional seats, while Chikara Sono runs Kappo Sono, a kaiseki restaurant with a changing menu every two weeks based on Japan’s seasonal calendar.
Each restaurant will have dedicated kitchen facilities. One Bryant Park's lease spans 15 years, with a five-year renewal option; rent details remain undisclosed. The Durst Organization, represented by Tom Bow and others, looks forward to the success of these restaurants, which aim to fill the local demand for fine Japanese dining. The location is strategic, near significant office headquarters and tourist hubs like Times Square. Lee is also known for the modern Japanese restaurant Momoya, with venues in different parts of New York City.
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Aurora Capital Associates and William Gottlieb Real Estate secured a $293 million refinancing package from Corebridge Financial for their mixed-use building at 40 10th Avenue in the Meatpacking District. The deal, arranged by a Walker & Dunlop team, features a fixed-rate, permanent loan. The 10-story, 159,000-square-foot building, completed in 2019, houses office space—including tenants like Starwood Capital and WestCap Management—and retail on its first two floors, occupied by Hyundai Motors. Previously, Pbb Deutsche Pfandbriefbank had refinanced it with $300 million. Additionally, Aurora Capital recently partnered with TPG Angelo Gordon to acquire a boutique property at 410 West 13th Street for $71 million. Meanwhile, a legal dispute has arisen between Urban Zen and a William Gottlieb affiliate over pest issues, with both parties exchanging lawsuits amidst allegations of unsafe conditions and property neglect.
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The competition for AI office space intensifies between San Francisco and New York. Key players, particularly Anthropic, have made significant leases in both cities. In July, Anthropic secured a 466,000-square-foot lease at 330 Hudson Street in New York, marking the largest AI lease in the city to date, while in February, it signed for 413,000 square feet at 300 Howard Street in San Francisco, followed by another 250,000-square-foot lease. This totals over 1.1 million square feet of new space for Anthropic in 2023.
The starting rent for the San Francisco leases was $87 per square foot, with averages in each city around $77 and $82.83 respectively.San Francisco leads in total square footage leased, with its five largest AI leases summing to approximately 1.38 million square feet compared to New York's 1.08 million. Firms such as OpenAI and Sierra AI have also made substantial leases in the Bay Area.AI companies comprise 30% of San Francisco's leasing activity, while they leased 4.1 million square feet in Manhattan since 2023.
The Bay Area remains more reliant on AI for office demand, accounting for nearly half of all leasing in San Francisco.The demand for specialized talent continues to drive expansions in both markets, as companies struggle to find enough skilled workers. Consequently, many AI firms view both cities as essential hubs for attracting top talent and industry knowledge, adapting their leasing strategies accordingly.
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Steve Roth is increasing leasing activity in his Penn District office properties. On, a Swiss apparel and sneaker brand previously called On Running, has signed a 15-year lease for 85,000 square feet at Vornado Realty Trust’s Penn 1, moving from its current Soho location. The company will occupy the entire eighth floor (61,000 square feet) and 24,000 square feet on the seventh floor, featuring an outdoor terrace, with an asking rent of $120 per square foot. CBRE’s team represented On, while Vornado was represented in-house. Founded in 2010 by Ironman champion Olivier Bernhard, On went public in 2021, raising $746 million, with tennis star Roger Federer joining as a shareholder in 2019.
Recently, Kylian Mbappé became the brand's global ambassador. The company achieved over $1 billion in sales in the second quarter, with a gross profit of $676 million and is negotiating for a fourth store in NYC. Additionally, Gusto recently expanded its presence at Penn 1 with a 13-year lease for 38,000 square feet on the 47th floor, renewing its existing space for five more years, with a rent of $135 per square foot. Penn 1 hosts many major tenants and has undergone a $450 million renovation.
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Marty Burger's firm, L&L Infinite, a collaboration with David Levinson of L&L Holding, has entered the real estate market by acquiring the office property at 600 Third Avenue for $245 million, equating to $426 per square foot. The 575,000-square-foot, 42-story building was sold by L&L and an institutional investor, with additional participation from Mack Real Estate, BLDG Management, and BD Blakely. Levinson highlighted their leasing achievements as evidence of Midtown East's business revival.
Bain Capital supported the acquisition with a $215 million loan; IGCP represented L&L. The building, originally constructed in 1970, has undergone modernization and is set to feature an amenity floor. Current office tenants include Polsinelli, Energy Impact Partners, and 3G Capital, with 92 percent occupancy, while its retail section is fully leased to brands such as Dunkin' and Shake Shack. L&L Infinite, founded in January 2023, aims to acquire and reposition properties in New York City and South Florida, particularly distressed assets, after Burger's recent departure from Silverstein Properties, where he was CEO.
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JPMorgan Chase is negotiating to lead a significant financing effort for Extell Development’s luxury condominium project on Manhattan’s Upper West Side, previously the ABC television network's headquarters. Extell, headed by Gary Barnett, seeks approximately $3.8 billion in financing, marking one of the largest construction loans in U.S. history. Representatives for both Extell and JPMorgan have refrained from commenting on the discussions. Barnett's track record includes redefining luxury condos in New York, and earlier this month, Extell secured $1.25 billion for an 1,800-room hotel project in Times Square named the Torch.
Extell, known for notable buildings like One57 and Central Park Tower, purchased the ABC site in 2022 for $930 million with funding from Guggenheim Partners and began demolition last year, filing plans for a 1,200-foot tower designed by Robert A.M. Stern Architects. However, challenges persist, including a proposed tax on out-of-town condo owners by New York Mayor Zohran Mamdani, which raises concerns over deterring affluent buyers, and local community board demands for affordable housing commitments. Additionally, Vornado Realty's Steven Roth mentioned a $3.3 billion loan for a Park Avenue office tower, while JPMorgan led a $2.8 billion financing for a Beverly Hills project combining hotel and luxury residences.
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George Comfort & Sons is seeing positive developments at its Midtown South office tower, 200 Madison Avenue. In partnership with Loeb Partners Realty and Jamestown, they secured a $386 million loan to refinance the property. This floating-rate loan spans three years with two one-year extension options, provided by New York Life. The 750,000-square-foot building recently underwent renovations, including a revamped lobby and the introduction of 11,000 square feet of amenities like conference rooms, a game area, and an event space. CEO Peter Duncan highlighted the refinancing as a sign of confidence in the building's top-tier amenities and prime location.
Recently, Havas Health finalized a lease for 254,000 square feet, which includes a 65,000-square-foot expansion. Other tenants include architecture firm Spectorgroup and law firm BraunHagey & Borden, while ground-floor retail features fitness brand TMPL and Roche Bobois. Office rents range from $70 to $75 per square foot. Notably, leasing in Midtown South reached 5.05 million square feet in Q2, marking the strongest quarter since 2001, with availability dropping to 12.7 percent. Average asking rent in the area decreased slightly to $79.41 per square foot but increased year over year by 2.4 percent.
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SoHo has experienced fluctuating fortunes throughout its history, transforming from an artistic hub in the late 20th century into a retail hotspot dominated by fashion stores that echo its 19th-century textile roots. Economic conditions in SoHo have also seen ups and downs, particularly with the impact of the pandemic leading to iconic retailer closures like Foot Locker in 2023. However, the recent buyback of properties by Thor Equities suggests a potential recovery, as the area reported a low retail vacancy rate of 9.1% in the second quarter of the year.
A key shift occurred in 2015 when SL Green Realty purchased 110 Greene St. for $255 million, signaling changes in ownership dynamics in SoHo. This property is now under contract for $226 million, indicating a loss for SL Green despite successful leasing efforts. The new buyer, Natora Group, led by Glenn Lostritto, reflects a transition in the neighborhood's identity, with plans to maintain high-end tenants like Balenciaga amidst a landscape of luxury brands such as Dior and Cartier. The historic buildings are transitioning away from their artistic past as they cater to an upscale retail environment that encapsulates a striking evolution of SoHo.
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In 2012, the Empire State Building disclosed it earned $60 million annually from its observatory, igniting a rush in Manhattan for new observatories. Since 2015, five observatories have either opened or been renovated, including One World Observatory, 1 Times Square, and Summit at 1 Vanderbilt Ave., along with enhancements to Top of the Rock. Developers responded to the Empire State Building's 70% profit margin, prompting substantial investments, such as KKR's $500 million acquisition of the Edge and Tishman Speyer's $400 million upgrades to Top of the Rock.However, the trend seems to be declining. A Bank of Montreal report indicates a 15% drop in traffic at the largest observatories this year, attributed to the diminishing "novelty factor."
The Empire State Building reported a 29% decline in August traffic, while the Summit surpassed it as the premier observatory for ticket sales, though it too saw a 3% decrease.Tourist numbers are also down, with a 4.7% drop in international arrivals and 1.4% in domestic travelers. The decline in traffic has caused Empire State Realty Trust’s stock to plummet 36% this year. Observatories are now attempting to maintain interest through new programming, but profit margins are already shrinking.
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The planned revamp of Penn Station may soon gain the crucial support of the Metropolitan Transportation Authority (MTA), as developer Penn Transformation Partners seeks to finalize plans for the $8 billion project. Andy Byford, appointed by Amtrak, indicated progress is being made and acknowledged support from Gov. Kathy Hochul. However, the MTA remains cautious, expressing concerns about retaining their rights under a long-term lease and not wanting to place the financial burden on New York taxpayers. MTA’s CEO, Janno Lieber, previously rejected collaboration due to financial and procedural uncertainties surrounding the project.
The redevelopment includes infrastructure firms Halmar International, Skanska, and Vornado Realty Trust, aiming to improve the station's configuration by removing 100 columns for better sightlines, while 900 columns must remain for structural support. The Halmar-led proposal suggests demolishing the Infosys Theater to create a new atrium and streamline the station layout. Final project approval is slated for spring, pending theater acquisition from Madison Square Garden. Byford anticipates significant federal funding for the initiative, which is set to begin construction next year and continue through 2033. When asked about renaming the station, Byford focused on the project's physical aspects rather than political considerations.
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