Duolingo Subleasing 86K SF From Spotify At 4 World Trade Center
Spotify has found a sub-subtenant for two floors of its U.S. headquarters at 4 World Trade Center.
Language learning app-maker Duolingo has agreed to take 86K SF of Spotify's space at the 72-story, 2.3M SF skyscraper, the company said in a regulatory filing.
Duolingo has agreed to occupy the 26th and 27th floors from the Port Authority of New York and New Jersey, which Spotify subleases alongside the 478K SF direct lease it signed with developer Silverstein Properties in 2017.
When Spotify expanded into the port authority's space in 2018, Crain's New York Business reported it had agreed to pay roughly $81M over the course of the 15-year, four-month lease, which works out to about $61 per SF.
The Swedish audio streaming company listed the space for sublease in May. It had planned to vacate those floors and three others by the end of the year, Bloomberg reported.
Spotify will be sub-subleasing the space for a premium. Duolingo won't pay rent for the first 20 months of the sub-sublease, but its triple-net rate for the first five years of the deal is $62 per SF, then it escalates to $67 per SF until the lease expires at the end of April 2034, according to its Securities and Exchange Commission filing.
"The flight to quality is playing itself out in the sublease market all over the city," Silverstein Properties Executive Vice President Jeremy Moss told Bisnow in an interview Thursday. "As a result, high-quality sublease space at the World Trade Center is getting leased quickly."
Duolingo has been occupying a full floor of the WeWork at 85 Broad St. since 2021, the New York Business Journal reported. A Duolingo spokesperson said the company will relocate its 150 NYC-based employees from 85 Broad to 4 WTC at some point in 2024.
“Duolingo is planning to move into a new office space in New York as we expand our team in the city," Duolingo Vice President of Workplace and Real Estate Sean Devlin said in a statement. “We’re continuing to hire for many roles in NYC and our other offices. We look forward to moving into this new space in a premium building.”
Spotify didn't return a request for comment.
Having Duolingo take down the space is a win for Spotify, which has been in cost-cutting mode. In its third round of layoffs this year, it let go of 17% of its global workforce earlier this month, 750 of whom worked in 4 World Trade Center, according to a filing with the state of New York. It still employs more than 2,000 people at the tower.
After hitting a 15-year high this spring, the amount of sublease space on the market has been steadily dipping as more deals get done and some companies pull their space off the market. Sublease availability decreased by more than 1M SF between the second and third quarters, according to Savills data.
Asking rent in Manhattan in the third quarter was $76.38 per SF on average, according to CBRE, but the average sublease space in Lower Manhattan was asking $48 per SF. When Spotify signed its initial deal with Silverstein, asking rents in the building were north of $80 per SF.
That lease brought 4 World Trade Center to 100% occupied at the time, but Silverstein recently lost a tenant in the building after MediaMath, which had a lease for 106K SF, filed for bankruptcy. The company rejected the lease in the bankruptcy and vacated the 44th and 46th floors, but its 44K SF sublease to Clear Street Management for the 45th floor was converted to a direct lease with Silverstein, Bisnow previously reported.
Moss said 4 World Trade Center is 95% leased, and of the building's occupied floors, 70% of workers with badges are coming in on peak days.
"The high-quality buildings in New York stay full, on a direct or subleased basis, because those are the buildings people want to work in," he said.
Jay Rickey contributed reporting for this article.
UPDATE, DEC. 21, 8:45 P.M. ET: This story has been updated to include additional comment and information from Duolingo.
