Much as we’re occasionally charmed by the artificially youthful Mort Zuckerman, what’s bad for Boston Properties, which he chairs, is sometimes good for New York City’s leasing market.
The postponement of Boston Properties’ plan to erect a $1 billion glass glacier of a skyscraper at 55th Street and Eighth Avenue has hurled two big law firms—Gibson, Dunn & Crutcher and Proskauer Rose—back into a marketplace that has been notable for its dearth of lease-seekers, and for what is, frankly, an obscene surfeit of high-end office space.
Gibson, Dunn, now at Tishman Speyer’s 200 Park Avenue, signed a lease in late 2007 for 215,000 square feet at the still-unbuilt tower, and Proskauer Rose had been, until recently, engaged in epic negotiations for an additional 400,000 square feet. It was the collapse of the latter that reportedly forced Mr. Zuckerman to put the kibosh on the tower, at least for the time being.
That leaves two luscious tenants on the market for the taking. Brokers, let the salivating begin. “Gibson, Dunn signed a lease at the height of the market and now the market has fallen,” said one tenant rep. “Now that the market is much lower, they probably have more alternatives.”
“Probably” is probably an understatement. In late January, Cushman & Wakefield’s Capital Markets team gave us this rattling statistic: The availability of sublease space has swelled 132 percent since year-end 2007. And sources put the Gibson, Dunn deal at over $120 a foot, which, from today’s admittedly privileged vantage point, looks just plain silly.
Meanwhile, Proskauer Rose was probably wise to kick Mort in the shins and run. CB Richard Ellis, which represents Proskauer, Gibson, Dunn and Boston Properties (how’s that for synergy?), is under a strict gag order. But an outside tenant rep said Proskauer’s current lease at Morgan Stanley’s 1585 Broadway contains a provision allowing the firm to renew at a 90 percent to fair market value (the fair market value would be determined through arbitration). Not a bad deal, given that rents have fallen precipitously. Also not a bad deal for Morgan Stanley. “Now, there’s an enormous possibility that Proskauer will stay put,” the broker said. “Guess what, Proskauer’s business isn’t expanding, and Morgan Stanley giving up rent at the height of the banking collapse would be the stupidest thing I’ve ever heard of. Proskauer will be exercising its option to renew, in my opinion.”
Neither law firm returned requests for comment.