Columbia Property Trust Buys 50% Of Normandy's Midtown South Office Development
An Atlanta-based REIT continues to make investments in New York City's hottest office submarket, Midtown South.
Columbia Property Trust has bought a 50% stake in 799 Broadway, a ground-up office development from Normandy Real Estate Partners. Columbia bought the stake from Normandy's previous partner, Ares Management.
Midtown South is the tightest office market in the city, with vacancy at 6.5% at the end of the second quarter, according to Transwestern, compared with 8.5% in Midtown and 12.1% in Downtown. The 182K SF 799 Broadway will try to capitalize on the convergence of demand drivers in the modern Manhattan marketplace: the flight of tenants to new construction and the concentration of tech tenants in Midtown South, where most buildings have been around for decades and attracted tenants with their history and lower rents.
The rents haven't stayed low. According to CBRE, asking rents in Midtown South are at an all-time high of $78.36/SF at the end of Q2, a 9% increase over the same period in 2017. And while there are millions of square feet of new office space being built in New York City, new construction in Midtown South is still a rarity.
Normandy and Columbia's development is expected to cost $300M and open in 2020 after beginning construction this summer, and will feature floor-to-ceiling glass, copious outdoor space and 15-foot ceilings.
“Normandy brings deep development expertise and success in Manhattan and elsewhere,” Columbia CEO Nelson Mills said in a statement. "Combined with Columbia’s repositioning and leasing track record in Midtown South, we believe this is a perfect partnership to develop 799 Broadway into a best-in-class office destination.”
Columbia adds 799 Broadway to its already-substantial portfolio in the area: It owns some or all of 315 Park Ave. South, 218 West 18th St., 249 West 17th St., 114 Fifth Ave. and 149 Madison Ave. The Atlanta-based REIT is reportedly exploring whether to offer itself for sale.
