2.15.22 - Vornado chairman on return-to-office announcements: ‘It’s getting a little silly’
' Although a broader return to the office is in the city’s near future, the constantly shifting announcements of return dates in the past nearly two years have become somewhat ridiculous, says Vornado Realty Trust Chairman Steven Roth.
“It’s getting a little silly, where people announce they’re going to call back their workers on X date, and then that gets postponed and postponed and postponed again,” he said. “From my point of view, and that of my partners here, speculating on when all this is going to be over and when the occupancy rate in the offices will go back from the 30% that it is now up to the 75% that’s normal, I think it’s silly.”
Roth made the comments on Vornado’s fourth quarter earnings call Tuesday morning, where he struck a largely positive and confident tone despite the struggles New York’s commercial property market has faced since the onset of the pandemic. He stated that Manhattan’s retail market had bottomed out, with activity accelerating and lease terms improving even over pre-Covid levels, but he singled out empty office buildings as a major outlier in an otherwise increasingly full city.
“That last domino will be when employers and employees resolve hybrid work schedules, and the office districts are again teeming with activity,” he said, “and I submit that will come sooner than you think.”
Tenant incentive packages remain high, which Vornado is not happy about, and retail in New York has not made a full recovery yet, according to Roth. However, he noted that the sector was doing well elsewhere in the country and this would be the case here as well soon enough.
“Around the country, retail is recovering surprisingly well and aggressively,” he said. “The big cities in America are lagging, and New York is a lagger.”
The politics surrounding the city’s longstanding and frequently changing efforts to revamp the area around Penn Station, which Vornado would play a huge role in, barely came up, although Roth did say that the company is “extremely optimistic about the political climate in New York” at the mayoral and gubernatorial levels. Gov. Kathy Hochul’s current plan for the Penn Station neighborhood would involve Vornado and other landlords building 10 new office towers, but this plan does not yet have the full support of the city.
Vornado leased about 2.3 million square feet of New York office space in 2021 at an initial rent of $83.26 per square foot, and the firm leased 229,000 square feet of retail space for the year at an initial rent of $145.44 per square foot. Roth touted the firm’s leasing numbers on the call and doubled down on its trust in Manhattan. '
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