Who Still Wants To Lease NYC Office Space? Russell Investments.
After 9/11, New York’s commercial sublease rate doubled. Whether that happens following the pandemic is still up in the air.
Russell Investments’ lease on its New York office is up in September, and the firm has no new office space ready to go.
But, according to the firm, it wants to find a new spot in the city.
Before the Covid-19 pandemic, the investment manager’s New York staff occupied the 14th floor of 3 Bryant Park in Manhattan, the same building that houses tech giant Salesforce. Now, Russell’s employees are working from home, and the September 30 deadline is looming.
Russell, in some ways, is in an enviable position as far as finance firms in New York go: a lease expiration could cut costs significantly. And it’s not unprecedented for finance firms to move amid crises.
“I’ve seen a lot of different downturns and problems with New York real estate,” said Michael Colacino, president of SquareFoot, a New York-based commercial real estate company.
After 9/11 and the dot com bubble burst, Colacino said, New York subleases rates doubled, increasing from about 20 percent to 40 to 45 percent. He added that something similar happened during the financial crisis of 2008.
But Russell isn’t making the decision to leave the city.
“We are committed to having a New York office, but our ability to transition to a new office space has been impacted by the pandemic,” Steve Claiborne, a spokesperson for the firm, said via email Thursday.
He added that Russell is “confident” that its employees can work from home until the firm moves them to a new location, though he could not yet say when or where that would be.
“We don’t have details to share on the new space as we have paused our search in light of the pandemic,” he added. “We’ll continue to work with our broker to identify attractive and available space when we are safely able to resume the search. We are committed to serving clients through a New York office as we have for over 50 years.”
Real estate experts are mixed on whether financial firms will move their offices out of the city.
“A lot of plans made internally are galvanized by what happened with Covid-19,” Colacino said. “It’s definitely a catalyst, and people don’t want to be late to the party.”
And for financial firms, which are the largest tenant group in New York commercial real estate, this is especially true, Colacino said.
“The first-mover opportunity is what financial firms are good at,” he said.
According to Aleksandra Scepanovic, managing director at Ideal Properties Group, another New York broker, Ideal hasn’t seen a lot of companies move yet.
“My sense is once the city reopens and the realization sets in that people physically may not be comfortable coming to the office, the full scope of the impact will be easier to understand and analyze as it pertains to necessary office space and how much of it remains essential for a business to be successfully run,” Scepanovic said via email Thursday.
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Still, Colacino said he doesn’t expect the move toward working from home to make offices obsolete. For trading firms, in-person work is important, he said.
“You’re not going to replicate that with people in their basements in Greenwich Connecticut,” he added.