The supposed “office-market collapse due to WFH” lasted less than 72 hours. But it sure stirred up what RXR Realty CEO Scott Rechler called a “firestorm,” reflecting how much the industry remains on edge.
The Financial Times reported last week that Rechler planned to “give back the keys” to his banks at some RXR properties, prompting scary headlines. Fortune howled, “A new era of remote work has pushed a New York property magnate to consider giving up some of his office buildings: ‘I don’t think there’s anything we can do with them.’”
OMG, went the speculation. Could Rechler be unloading mammoth WorldWide Plaza, Five Times Square or 75 Rockefeller Plaza?
But it turned out that Rechler was referring to only two under-performers among RXR’s 91-building, 31 million square-feet commercial holdings valued at $21.2 billion. Rechler wrote a note to investors, uncovered by the Commercial Observer, clarifying that no wholesale purge was in the works.
The properties are probably 110-year-old 61 Broadway and 1889-vintage 47 Hall Street near the Brooklyn Navy Yard. Rechler wouldn’t confirm the exact addresses, citing bank confidentiality.
But he told Realty Check on Friday, “How the story got picked up was symbolic of anxiety about the future of offices. It set off a firestorm. We’re all cognizant there’s a sense of existential change.”
Rechler said that RXR might not even part with the two properties now under discussion. Talks with lenders are ongoing to convert them to apartments or to mixed use, and only if those efforts fail would Rechler be ready to give back the keys.
“We’re actively working on conversion plans but we’d need lenders to modify the loans,” he said. “We’d invest a lot of money in this.”
Rechler offered this perspective on the Big Apple’s commercial situation. “The much-talked-about ‘flight to quality’ is a reality playing itself out,” he said. “One theme is renewals by tenants who want to spend a lot of money to stay where they are, and another is tenants trading up to higher-quality buildings to lock in rents” before they rise.
He’s cheered by a visible occupancy in RXR towers, some of which have seen 100 percent employee attendance on “peak midweek days.” One day last week, “I never saw our lobby at 75 Rock so busy.”