RXR Is Still Bullish On Office — But Only If It Has A Golf Simulator

RXR CEO Scott Rechler has been among the most outspoken nonbelievers when it comes to office space. But the major New York City office owner’s opinion may be more nuanced, RXR head of leasing Bill Elder says.

“Everybody's going through the same challenges, but nobody was talking about it. Scott talked about it,” Elder said. “It was thoughtful, and it was acknowledging reality that nobody wanted to do. That's what makes my life and job easier, because we acknowledge the facts.”

In a move that somewhat contradicts Rechler's public statements, RXR and SL Green took out a $1.3B loan from a group of lenders including Morgan Stanley, Apollo Global Management and American International Group to refinance the 2002-built office tower at 5 Times Square in September 2022, and they pledged $300M of the joint venture's own funding for renovations, Bloomberg previously reported.

On a sunny February morning, Elder took Bisnow on an exclusive tour of the space he says will bring workers flocking back to the office with enthusiasm: a newly finished full floor of tenant amenities at 5 Times Square spanning 32K SF and dripping with meticulous detailing.

The fourth floor of 5 Times Square, a 1.1M SF trophy office tower on the same block as NYC’s busiest subway station at 42nd Street, is dedicated solely to amenities, was designed by the Rockwell Group and has an array of spaces to help workers feel like they aren't in the office — without leaving the building.

Rechler wasn’t wrong, Elder said. He predicts the dynamic presently dominating the office market will continue, with older properties or buildings without amenities struggling to sign tenants.

“Given that trophy new construction being a very limited amount of product, you'll see the next level be successful,” he said, standing in one of the building’s multiple lounge areas as smooth jazz played in the background. “The bifurcation will continue.”

The first lounge area accessible to tenants is flanked by two receptionists, and it is filled with a mixture of wood-paneled walls, chairs and circular tables, with round ceiling lights mirroring the design from above. It leads directly into 5 Times Square’s private restaurant, run by Michelin-starred chef Daniel Boulud.

Nearby, a grab-and-go coffee space offers a more casual setting for officegoers seeking a quick pick-me-up. And next door is an offering for anyone looking for something harder to close out the day: The building’s bar space has crescent-shaped velvet sofas facing a Venetian-marble bar, whose texture is mirrored in a muted navy rug and in the ceiling. 

But the secret to making a successful amenity space isn’t the painstaking attention to detail in the interior design, despite the aesthetics taking roughly a year to hash out. Instead, it is how tenants get introduced to the space and how it is run throughout the year, said David Gise, RXR's senior vice president and head of hospitality and amenities.

The building’s ownership surveys tenants to see what types of activities they are interested in and makes a program based on that input, Gise said. In charge of making sure the space is properly utilized with that feedback is a team of resident experience officers, known as RXOs.

Some perks are available in multiple RXR buildings, like the owner’s rooftop honey-making initiative where they make and give away honey to educate employees on the importance of bees. But the RXOs are what will make 5 Times Square's amenities shine through, Gise said.

“They're really bringing in the programming and curating the right mix of wine-and-cheese nights and paint-and-sip nights and things in the golf simulator and programs in the fitness center so that the tenants are actually using them,” Gise said.

The golf simulator is one of the building’s most popular amenities, Elder said. Despite only having been open for three weeks at the time of Bisnow’s tour and with tech company Roku being the sole tenant in the building, the space had seen 80 bookings already.

“It's used every day, about four or five bookings a day right now,” Elder said, adding that the simulator is part of how RXR hopes to provide spaces that promote mental and physical health in a single stroke.

“It's that decompression in the middle of the day. It's like, ‘I'm going to kill somebody. I’ve got to come down to swing a golf club.’ We all know work’s not easy sometimes. These are spaces where you can kind of escape.”

For employees looking for a more intense way to blow off steam, the amenity floor also comes with a gym replete with cardio equipment and weights with upbeat pop and techno pulsing through the speakers at a low level. A spa-level changing room complete with steam rooms and a massage room with a therapist available for bookings are also offered.

There are also more lounges, plus a recording studio for aspiring podcasters and multiple conferencing spaces, run by hospitality company Convene, that can be split into smaller rooms or expanded depending on the size of the audience. But one element that office workers say they want more of is missing almost throughout the space: natural light.

The conference spaces come with blackout blinds because natural light isn’t conducive to audiences being able to see presentations, Elder said. But besides that, he isn't convinced natural light is as important to workers as they say it is.

“When people are in these spaces, at least from what I've noticed, I don't think they're going necessarily for the view as they are for the amenity,” he said.

Where tenants really want light is in the office spaces themselves, which isn’t a challenge on the upper floors but is an issue on some of the lower ones, Elder said.

Because of this, RXR and SL Green have set lower asking rents for the lower floors. 

Overall, the asking rents at 5 Times Square are far lower than some of their competitors. Trophy rents in core Midtown Manhattan averaged $112.80 per SF during the fourth quarter, according to a report from Avison Young.

But at 5 Times Square, they range from the low-$80s to the high-$90s, RXR told Bisnow. That is an adjustment from the $100 per SF the owners originally planned on asking for, the New York Post reported in December 2020. 

Part of 5 Times Square’s thesis is that it is worth holding out for full-floor tenants, betting on the idea that the demand for large trophy spaces in good locations will hold strong due to limited supply.

As many as eight potential tenants are already lining up for space, Elder said, despite the building only coming online in December.

“The market’s come down a tad,” Elder said. “You're competing still with some other options, you've got lease expirations — let's face facts, the tenant market is still weak.”

UPDATE, MARCH 14, 5:30 PM E.T.: This story has been updated to include information about the firm responsible for the amenity floor's design and the operator of part of the hospitality space at 5 Times Square.