New York City landlords’ newest pitch to office tenants: We’ll pay for furniture

Some New York landlords now have a new pitch for prospective tenants: Sign a lease with us and you won’t even need to buy furniture. Over the past six months, brokers Justin Myers and Dennis Someck of Lee & Associates NYC have worked on multiple deals where space was provided to the tenants already furnished or with a furniture allowance included in the rent. “Landlords are trying to be creative. You’re in a unique situation where there’s a lot of space and not many tenants willing to commit,” Someck said. Prior to the Covid-19 pandemic, landlords usually wanted tenants to sign at least a five- to seven-year lease. Now, with leasing activity down as tenants re-evaluate their space needs, some landlords are willing to accept two- to three-year leases. With a shorter lease like that, tenants are less likely to want to pay to furnish the space, so some landlords are now building those costs into the rent or furnishing the space, Someck said.

The Durst Organization and Empire State Realty Trust (NYSE: ESRT)are two of the big New York landlords offering tenants the opportunity to furnish their spaces at the landlords’ expense, he said. Someck pointed to FuboTV Inc.’s new 14-year deal for 55,000square feet at 1290 Avenue of the Americas, owned by VornadoRealty Trust (NYSE: VNO) and the Trump Organization. (He was not involved with the deal personally.)The lease included a construction allowance, of which a certain amount was permitted to be used toward furniture and fixtures. That’s a departure from the past, Someck said, and it’s an example of how landlords are working to stand out in the market. “They’re trying to be very creative, trying to be very flexible, trying to help tenants,” he said.

Myers and Someck mostly represent tenants, who right now are figuring out what footprint they’re going to have and how they’re going to structure office versus remote work post-pandemic. With many questions yet to be answered about the future of the office, Someck and Myers said they’ve noticed their clients — including tech companies — plan to lease more space per employee going forward.

Myers said in recent years, companies have usually leased about 200 square feet per employee. Now, that may be more like 300 to 400 square feet per person. Building amenities like outdoor space and access to transportation have become even more important, as well as cleaning practices and air filtration systems.

One of the big opportunities for tenants is the amount of space available. Companies on the market can choose to lease directly from landlords, sign a sublease deal, or rent flexible office space from companies like WeWork and Industrious. And with these landlords now offering furnished spaces with short-term leases, the difference between the three is smaller, Someck said. There are tenants taking advantage of the deals available, including companies from Europe and Asia looking to expand in the New York area, Myers said.

“It’s allowed for other companies to come in and take advantage of the market,” Myers said. Firms in the life sciences industry in particular have been in the market for more lab and office space. At the same time, some of the tech giants, including Facebook, Apple and Amazon, have also announced big new office commitments over the past year. Someck said for now, everyone involved in dealmaking is still figuring out how the market will look going forward. “These are all new landscapes for tenants, landlords and brokers,” Someck said. “We’re figuring it out as we go.”

Leave a Reply

Your email address will not be published. Required fields are marked *