Citadel is taking an office lease in Manhattan, a new market report from Savills analyzing the city's fourth-quarter performance for the industry finds.
The new lease transaction will give the financial service provider 500,000 square feet of space in the Plaza South submarket at 660 Fifth Avenue. The 39-story building, now owned by Brookfield Properties, was originally built in 1957 and renovated in 2022. The site now features a boutique lobby, outdoor terraces, and improved infrastructure. Also, the "11x19 feet single-pane glass units" is the "largest ever" implemented for redevelopment in New York City, according to Brookfield. In total, the redevelopment cost $400 million.
The move by Citadel comes after it along with Vornado Realty Trust agreed to buy 350 Park Avenue in 2023. The plan was to build an office tower that would give Citadel 850,000 square feet of space for its headquarters. However, the redevelopment isn't projected to be completed until 2032. Citadel plans to leave the space it currently occupies at 350 Park and move into 660 Fifth at the end of this year, as the firm waits for its headquarters to be completed, according to a report from Business Insider. Along with Vornado, Rudin Management is working with Citadel on the headquarters project.
Recently, Manhattan's office sector has been in strong demand. Leasing hit 10.7 million square feet in the fourth quarter, marking the strongest three-month period the category has seen in five years, according to Savills. The Midtown submarket led the way, which accounted for 77 percent of the total leasing volume in the city. Also, the availability rate dropped 110 basis points to 18.6 percent in the last three months of 2024.
However, going forward, Savills cited two challenges Manhattan's office market faces. One is the need for more office-to-residential conversions, as only 15 million square feet of space has been set aside. More activity is needed to bring the availability down for office properties, according to Savills. The other is distressed loans, as many operators have gone for "short-term extensions and modifications to avoid defaults," wrote Savills.
"However, more than $27 billion in CMBS debt tied to Manhattan office buildings matures over the next three years," the real estate firm added.
"While high-end buildings and well-capitalized owners are seeing fortunes improve, the road to recovery is still long for the balance of the market."