Within just a handful of months since breaking ground on its newest office development, national landlord BXP is nearing a deal with a tenant that could anchor about one third of the Manhattan tower's future space.
The Boston-based developer is in the final stages of negotiating a prelease agreement with insurance giant C.V. Starr to fill about 300,000 square feet at 343 Madison Ave., the Midtown site that slated to house a 46-story luxury office high rise. The talks, earlier reported by the Wall Street Journal, bolster the notion that demand for premium office space across New York has boomeranged beyond pre-pandemic levels, and tenants are clamoring over a dwindling number of available options.
The tentative deal, which has yet to be finalized, could still fall through. Yet if realized, it would be a significant boost for the 930,000-square-foot project that broke ground in July on a speculative basis, without a single tenant in hand.
Increased financing costs and residual uncertainty looming over the national office market has meant few developers have proved willing to kick off ground-up projects. BXP has been a standout since the start of the year, however, first breaking ground on a new development in Washington, D.C. and then with the start of its long-anticipated Madison Avenue plans.
New York's recovery has leapt far beyond other markets across the United States, and Manhattan office space is leasing at a pace that hasn't been experienced since 2006. Throughout the first half of this year, leasing totals throughout the city surpassed those reported throughout the same period in the years leading up to the pandemic.
Neither BXP nor C.V. Starr responded to CoStar News' requests for comment.
Building for demand
The insurance firm's potential home at the roughly $2 billion project would also result in a significant expansion relative to its current Manhattan space.
C.V. Starr has been based over at 399 Park Ave., a nearly 1.6 million-square-foot tower owned by BXP, for the past couple of decades. It currently leases about 190,760 square feet there for its corporate headquarters and is the property's largest tenant, according to CoStar data.
The deal comes as tenants have been willing to pay top dollar for premium space. Nearly 145 leases have been signed so far this year in Manhattan at rates of more than $100 a square foot, already surpassing the number of big-ticket deals reported through all of 2024, according to CBRE.
That convergence of demand, rising rents and some of the highest attendance rates in the country have bolstered optimism among developers, many of which are finally pulling the trigger on new projects in order to capitalize on Manhattan's momentum.
To be clear, the city is facing an increasingly bifurcated landscape in which much of the recent activity has been concentrated in the market's newest and nicest properties. The New York office market's 13.3% vacancy rate has been on a steady decline in recent months but is still far beyond the roughly 8% reported in the early months of 2019, CoStar data shows. Many of the older, commodity properties have faced increasingly dire financial circumstances, and conversions to alternative uses has become increasingly common as a way to combat the glut of undesirable space.
It's a different story for gleaming towers along the Park Avenue corridor or those with easy access to Grand Central Terminal, especially if they come stocked with perks such as rooftop lounges, on-site restaurants and cafes, and wellness-oriented amenities.
At BXP's 343 Madison tower, future tenants will have access to all of the above, a position the landlord is hoping will be enough to fill the remainder of the project ahead of its anticipated 2029 completion.