Japanese Firm Eyes NYC Sublease in Sign of Mounting Office Woes
(Bloomberg) -- A Japanese advertising firm is considering unloading what was supposed to be a new office in Manhattan, the latest signal that New York’s market is facing pressure as companies cut costs and re-evaluate their real estate.
Dentsu Group Inc. is exploring plans to sublease space in Chelsea, where Tishman Speyer is renovating a former U.S. Postal Service facility that was set to be the advertising firm’s main U.S. office, according to people with knowledge of the matter.
The brokerage CBRE Group Inc. is working with Dentsu.
“As part of their disciplined business strategy, our client Dentsu is assessing their real estate footprint to be aligned with their people and business’s needs in our new normal,” CBRE said in a statement. “With new opportunities for the future of work, they are exploring various workspace strategies including the optimization of their office space across five locations in Manhattan.”
A representative for Tishman Speyer declined to comment. Dentsu didn’t immediately respond.
Offices have held up better than hotels, malls and other types of commercial property in the pandemic, in large part because companies are locked into leases and have continued to pay rent even as employees work from home. But the jump in available sublease space signals that Manhattan landlords are facing pressure as the pandemic drags on.
Tenants put 2.5 million square feet (232,000 square meters) on the market in the third quarter, more than double the amount from a year earlier and the biggest increase since the global financial crisis. The glut of available offices is pulling down rents.
Dentsu signed a 15-year lease with Tishman last year for more than half of the 630,000-square-foot office redevelopment at 341 Ninth Ave., just east of Hudson Yards. Construction on the project started this year and the company had planned to consolidate its New York City-based employees in the building starting in 2023.
Dentsu recently reported quarterly profit that was down 60% from a year earlier, with the pandemic battering the advertising industry.
The potential sublease was reported earlier by Business Insider.
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