CEO Steven Roth says New York is approaching its strongest landlord market in 20 years
Vornado Realty Trust is seeing renewed strength in Manhattan’s high-end office market, with CEO Steven Roth stating that landlords are steadily regaining negotiating power. According to Roth, limited new supply combined with consistent demand from financial services, technology, and other major industries will continue to favor property owners for the foreseeable future.
Speaking during the company’s fourth-quarter earnings call on Thursday, Roth said, “New York is on the cusp of the best landlord’s market in 20 years.” He also described Manhattan as “by far the strongest office and residential real estate market in the United States.”
In 2025, Vornado completed 3.7 million square feet of office leasing in Manhattan — its highest annual total in more than a decade and the second-largest year in the company’s history.
Much of that activity was driven by the firm’s Penn District redevelopment projects. At Penn 2, the repositioned tower above Penn Station, Vornado leased 908,000 square feet during the year, including 231,000 square feet in fourth-quarter transactions. Those fourth-quarter leases achieved an average starting rent of $114 per square foot, exceeding the full-year average of $109. The building has now reached 80% occupancy, and Roth said he expects it to be fully leased by the end of this year.
For the second consecutive year, Vornado outpaced other Manhattan landlords in leasing the highest volume of premium office space. A JLL report found that the company secured approximately 2.6 million square feet across 47 high-value deals, largely driven by activity at Penn 1 and Penn 2, both of which offer direct access to Penn Station.
“Not long ago, $100 rents were considered exceptional,” Roth said. “Today, they are commonplace in top-tier buildings, with some rents reaching $200 and occasionally even $300 per square foot.” He attributed the surge to a significant shortage of high-quality office space and sharply rising construction costs, noting that building a new office tower in Manhattan can now cost around $2,500 per square foot.
Even at today’s elevated rental rates, Roth said it remains challenging to justify new construction financially. “These are multibillion-dollar projects that are extremely difficult to finance,” he added.
‘Best deal ever’
Within this context, Roth highlighted Vornado’s September acquisition of the office condominium at 623 Fifth Ave., located above the flagship Saks Fifth Avenue store, as a standout investment. The company purchased the property for $218 million, or $569 per square foot.
Calling it “the best deal ever,” Roth emphasized the building’s prime Midtown location, surrounded by landmarks such as Rockefeller Center and St. Patrick’s Cathedral, with JPMorgan Chase’s new headquarters at 270 Park Ave. nearby.
The property is currently largely vacant, which Roth views as a strategic advantage for redevelopment. He estimates the full renovation, including tenant incentives, will cost approximately $1,200 per square foot. Vornado plans to transform the asset into a boutique office property comparable in prestige to 220 Central Park South, the luxury condominium tower known for record-setting sales.
“We’re essentially creating a brand-new building from top to bottom at half the cost of a ground-up development, in one of the most valuable locations in Manhattan,” Roth said. The company aims to deliver the completed project by the end of 2027 — roughly half the timeline required for new construction.
Roth added that the redevelopment alone could contribute 11 cents per share to Vornado’s earnings.
He also downplayed concerns regarding the bankruptcy filing of Saks and uncertainties surrounding its flagship store. “Any outcome from the Saks Fifth Avenue bankruptcy will work in our favor,” Roth said.
Source: Original reporting by Andria Cheng, CoStar News.
