Citadel, After Signing Most Expensive NYC Office Lease Ever, Exploring Other Office Options

Hedge fund Citadel’s decision to look for office space in Midtown has some questioning if it really does plan to move to L&L Holdings’ office tower at 425 Park Ave.

The Ken Griffin-led fund signed up for 200K SF at the building in 2016, which was said to be the most expensive lease in the city’s history with rents as much as $300 per SF in the top two floors.

But the construction of the Norman Foster-designed building is now running 12 months behind schedule and Citadel has hired JLL to look for space in the Midtown area. Next month, Citadel will be able to pull out of its lease because space has not been delivered at the agreed-upon time, Crain’s New York Business reports.

"It's an opportunity to check the market and reexamine whether the lease they signed two years ago is still the best deal for the firm," an unnamed real estate executive told Crain's. Other sources told Crain’s Citadel is moving ahead with the deal, and is merely looking for interim space.

L&L CEO David Levinson said there is “no question” the company will make the move to the building as planned. He said the construction process is complex, which means the process is taking longer than expected.

“We had to marry the old steel and concrete to the new steel and concrete. Imagine taking the legs away from a desk and keeping it upright while you put on a new set of legs,” he said.

Once complete, the tower is slated to be the first full-block office development built on Park Avenue in almost 50 years, for now. 

Many office tenants have elected to move Downtown or over to Hudson Yards in recent years, but JP Morgan’s decision to build a new building for its headquarters at 270 Park Ave. is expected to bring extra cachet to the area.

Still, competition for offices remains strong in the city, with tenants largely looking to new buildings with lots of amenities, leading to record-high concessions.