IIt’s lunchtime at One Vanderbilt, a new office tower jutting out of Midtown Manhattan. The building’s huge basement kitchen hums as stressed-out staff in white chef’s shirts come and go through the swinging doors. Upstairs, gourmet salads and soups are served in a lounge overlooking Grand Central Station; offers a sit-down restaurant Foie gras, grilled scallops and other dishes by Daniel Boulud, a celebrity chef. There’s not a soggy Al Desk sandwich in sight.
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Across the rich world, the commercial real estate industry is in a dire state. Tenants have come to terms with the fact that working from home is here to stay and are downsizing accordingly. In cities like Hong Kong, London and Paris, vacancies have reached record highs. Another indicator of deteriorating sentiment is that global investment in offices fell 42% last year, compared to a 28% decline for real estate as a whole. A recent paper by New York University’s Arpit Gupta and Columbia University’s Vrinda Mittal and Stijn Van Nieuwerburgh predicts that offices in New York could lose nearly 40% of their value between 2019 and 2029, equivalent to $453 billion.
Yet One Vanderbilt, a 93-story skyscraper topped with a sparkling Hall of Light observatory (pictured), is among a spate of new Trophy properties and renovated buildings that offer interiors and services worthy of Elite -Resemble private clubs. Last year, tenants in Manhattan signed deals for 6.1 million square feet (566,709 square meters) of high-end office space, double the amount from the previous year, they said jll, a real estate company. The luxury turnaround was underway before the pandemic, but accelerated as companies competed with remote working. If a company needs space for only half its employees every day, it can pay more per square foot.
So the picture at the top of the commercial real estate market is very different from the misery at the bottom. Although New York is home to the most opulent new buildings, extravagant offices are also springing up in other world cities. In London, the owners of 105 Victoria Street are building 30,000 square feet of green space – the equivalent of 14 tennis courts – including a city farm and a walk-and-talk path. Merdeka 118, a skyscraper under construction in Kuala Lumpur, will feature one of the world’s tallest observation decks.
According to Cushman and Wakefield, a real estate consultancy, before the pandemic, desks made up around 60% of office space. Things have changed significantly. New and refurbished offices use half of this space for workspaces, increasing the proportion for amenities from 5% to 20%. Meditation rooms, bike storage, showers, outdoor areas and other goodies are now available de rigueur.
The result is an arms race at the top of the market, especially in the most competitive cities. Many of the new luxury offices offer concierges — some have poached hospitality teams from places like the Four Seasons hotel chain — and rooftop bars serving quality alcohol. They usually have conspicuous entrances. Located at 425 Park Avenue, an office building around the corner from One Vanderbilt, the lobby is three stories high. At Spiral, a new tower with tree-lined terraces on each floor, the lobby is infused with a signature scent and soothing music.
The goal is to make life as comfortable as possible for workers – not only to get people back into the office, but also to support hiring in a tight job market. Renters at 50 Hudson Yards, home of BlackRock, an investment firm, and Meta, a social media giant, have access to a helipad that offers five-minute transfers to John F. Kennedy International Airport for about the price of an Uber SUV. Other offices offer services such as pet grooming, babysitting, and dry cleaning. Landlords are rushing to beautify older offices too. the big The building, a 55-year-old tower overlooking Central Park and once owned by the Trump Organization, has recently been renovated and now includes a bar, lounge and fitness center with spinning and yoga studios.
However, modern workers are not only looking for luxury. They also want to ease their conscience. Therefore, green buildings are becoming more and more popular. For landlords, these have the dual benefit of generating higher rents and insuring against obsolescence as countries seek to meet their net-zero carbon goals. New energy efficiency requirements for buildings in England and Wales mean more than half of London’s office stock could be unusable by 2027. In Europe, by 2030, buildings will have to get around half of their energy from renewable sources. Among the newer offices, clean air, minimal CO2 emissions and better insulation are the order of the day. Another tower in the Hudson Yards development, Manhattan West, will be powered entirely by renewable energy. Like many developers, the tower’s owner, Brookfield, is aiming for net-zero emissions by 2050.
But one question hangs over the luxury boom, and it’s a big one. What happens to the market when the economy deteriorates? After the global financial crisis of 2007-09, premium buildings were hit less hard than their more modest competitors, but the entire industry suffered. In London, prime office rents in the third quarter of 2009 were 35% below their 2007 peak. That’s something owners of today’s luxury towers have to hope for Foie gras and high-tech gyms will protect them next time. ■
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