SL Green Realty's longtime president, Andrew Mathias, is leaving his position in a surprise move that one analyst said suggests serious cost cutting. It's an executive shake-up that comes at a time when the U.S. office sector is struggling.

Mathias, who has served as SL Green president since 2007, will leave his post at the end of the year as Manhattan’s largest office landlord opted not to renew his contract, the real estate investment trust said Tuesday in a statement.

He joined SL Green as a vice president in 1999 and “played a key role in the company’s historic growth,” SL Green said, adding he will remain a board member and serve as an adviser to Chairman and Chief Executive Marc Holliday. “Andrew has been a true partner in everything we’ve accomplished at SL Green from the very beginning, working side-by-side to take this company from IPO to the undisputed market leader in New York City,” Holliday said.

The move comes as higher interest rates have hurt office landlords seeking financing especially hard and have led to increased defaults. The economic uncertainty and those higher costs has also led some companies to cut back on expenses and staff.

Holliday is expected to be named interim president after Mathias steps down, SL Green said in a regulatory filing.

An SL Green spokesperson didn’t immediately respond to a CoStar News request seeking further comment and to say whether SL Green intends to name a permanent replacement.

“We have a proud history at SL Green of developing and empowering young talent, and I look forward to seeing our next generation of leaders flourish and take SL Green to the next level,” Mathias said in the statement.

Mathias didn't immediately respond to a direct emailed request for further comment.

Mathias’ future role as an adviser to Holliday will begin Jan. 1 for a year and is subject to one-year renewal periods, SL Green said in the filing, adding that Mathias will get a monthly fee of $8,333 as an adviser, plus certain perks.

In contrast, he received a total 2022 compensation of nearly $11.9 million, including $950,000 in base salary and $1.36 million in a cash bonus, according to SL Green’s proxy filing this year.

The "surprise announcement that [SL Green] stalwart, President Andrew Mathias, who has worked with CEO Marc Holliday for decades, is leaving shows the depth of this office upheaval,” Piper Sandler analyst Alexander Goldfarb said in a note to clients.

He added that “importantly, he is staying with [SL Green] through year-end, will remain on the board, and serve as an [adviser] to the CEO. Thus, we interpret this news to reflect a desire by the company to cut costs aggressively and note that several from the C-suite have departed in recent years as [SL Green] has skinnied down.”

The fact that Mathias will stay on the board and remain an adviser “shows his knowledge and relationships remain valuable,” Goldfarb said, adding that SL Green has a “strong farm team” to move forward. Goldfarb maintains the equivalent of a buy rating on the REIT's stock.

Other SL Green executive departures in recent years have included former Chief Investment Officer David Schonbraun, who left in 2021 after nearly two decades with the company, according to an announcement at the time.

In another New York example outside SL Green, Jan LaChapelle, formerly head of capital markets for Vornado Realty Trust, took a job overseeing asset and fund-level financing for multifamily developer Cortland. Vornado said Tuesday it filled that position.

The potential loss of SL Green’s “key personnel,” including Mathias and Holliday, is listed as a risk factor in SL Green’s annual filing as the REIT said that “a loss of the services of either of these individuals could adversely affect our operations.” Holliday’s contract expires in January 2025.

Mathias’ leaving his post comes as office landlords in both New York, the top U.S. commercial property market, and the United States are faced with record-high vacancies, even as top-tier properties such as SL Green’s One Vanderbilt are faring well.

While the return-to-office rate has improved from its worst point during the pandemic, a recent study by the Partnership for New York City, whose members include major national corporations, showed the trend of working just some days in the office is now part of the new work norm.

Employers expected Manhattan office attendance would not see any big jump for “the foreseeable future” and would inch up just slightly to 59%, or 73% of the pre-pandemic “normal,” the survey said.

That, coupled with economic uncertainty, raises more questions about companies’ space needs.

SL Green is “not alone in office cost cutting” at the C-suite level, Goldfarb said, adding that Los Angeles-based Hudson Pacific Properties is another example.