WeWork Signs Full-Building Lease in NYC

By Barbra Murray

609 Fifth Avenue

SL Green just leased 609 Fifth Avenue’s entire office segment in one fell swoop. The REIT closed a deal with shared workspace provider WeWork to occupy the newly repositioned property’s 138,600 square feet of office accommodations.

609 Fifth Avenue opened its doors in 1925, standing 13 stories on a prominent corner in Midtown. SL Green prepped the building for a renaissance in 2017, when it closed a deal with then-tenant DZ Bank to relocate to the REIT’s One Vanderbilt project. With the office segment empty—and American Girl vacating its anchor retail space by the 2018 expiration of its lease—SL Green embarked on the redevelopment endeavor. The changes included the relocation of the lobby and high-end redesign of the retail space, where sports brand PUMA signed a 24,000-square-foot lease earlier this year.

The WeWork agreement brings the lease level at 609 Fifth Avenue to 96 percent, with only a roughly 5,000-square-foot retail store available for the taking. “When the opportunity to take over the entire office space presented itself, we simply could not say no,” Granit Gjonbalaj, chief development officer at WeWork, said in a prepared statement. Commercial real estate services firm JLL’s Peter Riguardi, Michael Berg and Howard Hersch represented WeWork in the lease transaction.

The new go-to tenant?

SL Green’s new lease with WeWork at 609 Fifth Avenue marks the REIT’s second full-building office lease with the coworking space provider. In 2015, SL Green landed a commitment from WeWork to occupy the 136,100-square-foot property at 315 W. 36th St.

Coworking companies’ leasing of entire buildings has become a more common occurrence in New York City over the past few years. WeWork has made a notable contribution to the statistics. In the first quarter of 2018 alone, the company signed a lease to occupy the 167,000-square-foot office portion of the property at 18 W. 18th St. and inked a deal for all 59,400 square feet of the office segment at 408-410 Broadway.

Shared workspace providers can’t seem to get enough of the Manhattan market—they accounted for 12 percent of the approximately 25 million square feet of office space leased in the first three quarters of 2018, compared to 4 percent of the 23.8 million square feet leased during the same period in 2017, according to a report by commercial real estate services firm Avison Young.  And gone are the days when coworking companies focused on Class B and C properties. “The overall Manhattan office leasing market continues to be impacted by a growing amount of coworking activity that is spreading to higher quality product,” per the report.

Image courtesy of Yardi Matrix