Facebook Got A Large Discount For Its Mammoth Office At the Farley Building
Facebook’s giant lease on Manhattan’s West Side was a shot in the arm for the city’s frail office leasing market, but the deal came with some serious landlord concessions.
The social media giant is paying $109 per SF at the Farley Building on Eighth Avenue, Business Insider reports. The lease is for 15 years, and Facebook scored 18 months free rent for 80% of the space and 23 months for the other 20%, BI reports. Once the rent kicks in, it will increase by $10 per SF every five years, but before that, Vornado is giving $146M to Facebook for the office build-out.
Facebook was rumored to be negotiating for the space for months before the coronavirus hit New York. Ahead of the crisis, Facebook was set to pay $113 per SF, with a smaller tenant improvement allowance and fewer months of free rent. In all, Facebook is due to pay just over $1B in the entirety of the lease, down roughly $103M from the $1.13B that was on the negotiating table before the pandemic, BI reports, citing four sources with knowledge of the deal.
The fact that Facebook went ahead with the deal has been billed as a sign that New York City's office market is still able to lure prestigious companies, particularly those in the tech sector. Amazon's roughly $1B purchase of a Fifth Avenue office building has been similarly hailed as a win for the city's image.
But it is no secret the office market is taking some blows. The Manhattan office market is on track to hit a 20-year low for leasing volume, with asking rents declining and availability expanding. Large blocks of sublease space are projected to start hitting the market soon as some companies work to offload space.
And while there has been a big push from the real estate community to encourage companies to return to the city, many office buildings are still largely empty. Just 10% of workers were back at their desks in Manhattan as of Sept. 18, The Wall Street Journal reports, citing CBRE data.