Does the Office Real Estate Market Have a Pulse? Look at Blackstone’s Big Buy

Its purchase of a stake in a swanky NYC tower shows there’s demand for the new stuff. But older buildings are struggling.


So, no one will want to go back to the office, huh? A hefty office building deal just got inked for New York City, whose office buildings saw heavy outflows of workers when the pandemic struck in 2020.

The sale of a 49% stake in the 67-story, 2.1 million-square-foot office tower seems to counter the gloom and doom surrounding New York commercial real estate, and that of urban properties in general. The good news here is qualified, however: It’s the newer urban office buildings that are getting snapped up, while older ones languish.

The building, known as One Manhattan West, was bought by Blackstone Real Estate for about $1.4 billion. The seller was Qatar Investment Authority (the Middle Eastern nation’s sovereign wealth fund) and real estate company Brookfield. 

One Manhattan West, which opened in 2019, is part of the surging development in Midtown Manhattan near the Hudson River. The place already has a distinguished client list that includes accounting/consulting outfits Ernst & Young and Accenture, plus law firms Skadden Arps, Slate, Meagher & Flom and McKool Smith.

Manhattan offices have seen their vacancies rise, to 12% during the current quarter from 7.8% in 2020’s first period, before the pandemic overwhelmed the world, according to real estate data provider CoStar Group. Two-thirds of the new deals in Manhattan last year were for high-quality structures such as One Manhattan West, CoStar finds.

In last year’s final quarter, the U.S. office market logged positive net absorption (new occupancy minus vacancies) for the first time since the pandemic’s onset, per the JLL commercial real estate firm. Full-year leasing volume grew 14.6% above 2020 levels, while sublease space stabilized and vacancies plateaued. 

The action is mainly in Sun Belt markets such as Atlanta, Austin, Charlotte, Dallas, Miami, Nashville, Phoenix, and Raleigh. JLL says many of these locales are nearing pre-pandemic levels of leasing volume. Meantime, larger gateway cities continue to lag, as in New York, Chicago, and Los Angeles. 

That said, there are stirrings in those major cities, especially in New York. Google parent Alphabet last fall announced it would buy its own West Side Manhattan office building for $2.1 billion, a 1.3 million-square-foot waterfront property, now under construction. This marks the biggest office transaction since the pandemic began.

Institutional investors are increasingly turning to real estate, a key component of the burgeoning alternative investments category. Alts are popular among asset allocators as these investments will diversify their holdings and (allocators hope) provide good long-term returns.

In 2021, public pension funds had 8.1% of their portfolios in real estate, which ranked fourth in allocation after stocks (46.6%), fixed income (13.2%), and private equity (13.2%), by the count of Public Plans Data.

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